1. (20 pts) The financial statements using FIFO of Grady Company for 2016 and 20
ID: 2582507 • Letter: 1
Question
1. (20 pts) The financial statements using FIFO of Grady Company for 2016 and 2017 appear below:
Dec 31, 2017 Dec 31, 2016
Cash $10,000 $15,000
Receivables 12,000 10,000
Inventories (FIFO) 21,000 18,000
Other Assets 30,000 20,000
$73,000 $63,000
Capital Stock $30,000 $30,000
Retained Earnings 43,000 33,000
$73,000 $63,000
Income $ 10,000 $ 10,000
Retained Earnings 1/1 $ 33,000 $ 33,000
Dividends 0 ( 10,000)
Retained Earnings 12/31$ 43,000 $ 33,000
Grady changed to LIFO at the beginning of 2017. December 31 inventories at LIFO were $14,000 for 2016 and $20,000 for 2017. The beginning inventory of 2016 was zero.
A. Recast the above Income and Retained Earnings statement for 2017 under LIFO, assuming that 2017 will be shown alone and without any comparison to 2016.
B. Journalize the prior period correction at January 1, 2017.
Explanation / Answer
B. Journal:
for 2016 inventory balance need to be declined by 18000-14000= 4000
after passing above adjustment, inventory balance in 2017 will become= 21000-4000= 17000
Adjustment required for 2017= 20000-17000= 3000 increase in value
2017 2016 Cash 10,000 15,000 Receivables 12,000 10,000 Inventories 20,000 14,000 Other Assets 30,000 20,000 72,000 59,000 Capital Stock 30,000 30,000 Retained Earnings 42,000 29,000 72,000 59,000 Income 13,000 6,000 Retained Earnings 29,000 33,000 Dividends - (10,000) Retained Earnings 42,000 29,000Related Questions
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