Goddard Company has used the FIFO method of inventory valuation
since it began operations in 2018. Goddard decided to change to the
average cost method for determining inventory costs at the
beginning of 2021. The following schedule shows year-end inventory
balances under the FIFO and average cost methods:
Year | FIFO | Average Cost | ||||
2018 | $ | 46,600 | $ | 57,200 | ||
2019 | 82,800 | 72,600 | ||||
2020 | 89,400 | 82,800 | ||||
Required:
1. Ignoring income taxes, prepare the 2021 journal
entry to adjust the accounts to reflect the average cost
method.
2. How much higher or lower would cost of goods
sold be in the 2020 revised income statement?
Journal entry worksheet
Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Note: Enter debits before credits.
|
How much higher or lower would cost of goods sold be in the 2020 revised income statement?
|
ANSWER
Date |
Account Title & Explanation |
Debit |
Credit |
2021 |
Retained Earnings |
$6,600 |
|
Inventory |
$6,600 |
||
(Entry to Record Adjustment to reflect Average cost Method) |
|||
Particulars |
Amount |
||
2 |
Decrease in Beginning inventory |
($10,200) |
|
(82,800- 72,600) |
|||
Add: Decrease in Ending inventory |
$6,600 |
||
(89,400-82,800) |
|||
Net change in the cost of goods sold |
($3,600) |
||
The cost of goods sold in the year 2020 will decrease by $3,600. |
Expanation:
1) Cost of goods sold is = Beginning inventory + purchases during the period - Ending inventory.
2) The higher the value of Beginning inventory, the higher will be the cost of goods sold and vice versa. On the contrary, higher the value of the Ending inventory, lower will be the cost of goods and vice versa.
3) In the given case, the cost of goods sold in the year 2020 will have effect of both the beginning inventory (that is, the Ending inventory of year 2019) and the Ending inventory of the year 2020 as the value of both the inventories have changed due to change in the method.
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Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018....
Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year 2018 2019 2020 FIFO $45,800 80,400 86,200 Average Cost $55,600 71,800 80,400 Required: 1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost...
Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year FIFO Average Cost 2018 $45,500 $55,000 2019 79,500 71,500 2020 85,000 79,500 Required: 1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost...
Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year FIFO Average Cost 2018 $45,700 $55,400 2019 $80,100 $71,700 2020 $85,800 $80,100 Required: 1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost...
Exercise 9-24 (Algo) Change in inventory costing methods [LO9-6] Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year 2018 2019 2020 FIFO $45,600 79,800 85,400 Average Cost $55,200 71,600 79,800 Required: 1. Ignoring income taxes, prepare the 2021 journal entry...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE THANK YOU! Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year 2018 2019 2820 FIFO $45,900 89,700 86,600 Average Cost $55,800 71,900 80,790 Required: 1. Ignoring income taxes, prepare the...
Please show correct solution for the wrong answers and put in the same format as the image. Thank you! Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. Goddard decided ho change to the average cost method for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year 2018 2019 2020 FIFO $45,900 80,700 86,600 Average Cost $55,800 71,900 80,700...
Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows: Beginning inventory, FIFO (5,600 units @ $26) $ 145,600 Purchases: 5,600 units @ $32 $ 179,200 5,600 units @ $36 201,600 380,800 Cost of goods available for sale $ 526,400 Sales for 2018 (10,000 units @ $75) $ 750,000 Additional Information:...
Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows: Beginning inventory, FIFO (5,500 units @ $27) $ 148,500 Purchases: 5,500 units @ $33 $ 181,500 5,500 units @ $37 203,500 385,000 Cost of goods available for sale $ 533,500 Sales for 2018 (8,000 units @ $75) $ 600,000 Additional Information:...
Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows: $140,000 Beginning inventory, FIFO (5,000 units @ $28) Purchases: 5,000 units @ $34 5,000 units @ $38 Cost of goods available for sale Sales for 2018 (6,000 units @ $74) $170,000 190,000 360,000 $500,000 $444,000 Additional Information: a. The company's effective...
Rockwell Corporation uses a periodic inventory system and has used the FIFO Cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows: $150,000 Beginning inventory, FIFO (5,000 units @ $30) Purchases: 5,000 units @ $36 5,000 units @ $40 Cost of goods available for sale Sales for 2021 (8,000 units @ $70) $180,000 200,000 380,000 $530,000 $560,000 Additional Information: a. The company's effective...