Question

The following information applies to the questions displayed below.) Shown below are net income amounts as they would be determined by Weihrich Steel Company by each of three different inventory costing methods ($ in thousands). LIFO $2,380 Pre-2020 2020 FIFO $2,900 800 $3,700 Average Cost $2,640 550 $3,190 565 $2,945 2. Assume that Weihrich used FIFO before 2021, and then in 2021 decided to switch to LIFO. Assume accounting records are inadequate to determine LIFO information prior to 2021. Therefore, the 2020 ($565) and pre-2020 ($2,380) data are not available. Prepare the journal entry to record the change in accounting principle. (Ignore income tax effects.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands.) View transaction list Journal entry worksheet Record the change in accounting principle.

Answer 1

2. Change from FIFO to LIFO

The base year inventory for all future LIFO calculations is the beginning inventory in the year of change.

change from one inventory method to LIFO is handled prospectively. so no retrospective effect has to be given in such cases.

Change in inventory methods is considered as change in accounting policy . It is impractical to avail previous year data so as per GAAP businesses are not required to adjust prior year inventory balances.

So , NO JOURNAL ENTRY REQUIRED in this case.

However, financial statements should disclose changes in accounting policies.

Weighrich should prepare a discosure describing the change from FIFO to LIFO,justification for change and reason for not applying it retrosectively.