Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception...

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Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 197 Required 1 Required 2 What is the effect of the change in methods on 2021 net income? in cost of goods The effect of the chan

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Answer 1

Answer #1

Journal Entry- Rockwell Corporation
Date	Account Tittle	Debit	Credit
	Retained Earning	$20,000.00
	Inventory (140000-120000)		$20,000.00
	*TO Record Adjustment*

The Effect of Change for the year 2021 is a $ 18000 increase in cost of goods Sold resulting in a 18000 decrease in income before tax and (18000X60%)10800 decrease in income affter tax

Working Note

Computation of Effect in Net Income due to Change

Average Cost per Unit = (120000+170000+190000) / ( 5000+5000+5000)= $32 per Unit

Cost of Goods Sold as per FIFO
5000X 28	$140,000.00
1000X34	$34,000.00
Cost of Goods Sold as per FIFO	$174,000.00

Cost of Goods Sold as per Average method
6000X 32	$192,000.00

Cost of Goods Sold as per avergae method	$192,000.00

Increase in Cost of Goods Sold by ( 192000-174000)=$18000

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Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception...

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