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Tamarisk Company began operations in 2018 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2020, in accordance with other companies in its industry, Tamarisk changed its inventory pricing to FIFO. The pretax income data is reported below.
Year Weighted-Average FIFO
2018 $373,800 $403,300
2019 391,900 434,700
2020 412,800 471,500
A) What is Cullumber’s net income in 2017? Assume a 35% tax rate in all years.
B) Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.
C) Show comparative income statements for Cullumber Company, beginning with income before income tax, as presented on the 2017 income statement.

Respuesta :

tutorAnne

Answer: Please see explanation column for answer

Explanation:Given

Year        Weighted-Average      FIFO

2018         $373,800             $403,300

2019          391,900              434,700

2020          412,800              471,500

A)Cullumber’s net income in 2017? There is no 2017 from your queston., Am thinking you mean for 2020. However, the same calculations apply no matter the year, only change to the correct values.

Income before tax = $471,500

Income tax is at 35%=$471,500 x 35%= $165,025

Net income = Income before tax -Income tax = $306,475.

b)Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.

That is year between 2018 and 2019 before it changed in 2020, therefore 2020 will not be considered

year Weighted-Average FIFO  difference

2018 $373,800 $403,300       $29,500

2019 391,900 434,700           $42,800

Total                                        $72,300

tax rate = 35%  = Tamarisk Company began operations in 2018 and for simplicity reasons adopted weightedaverage pricing for inventory In 2020 in accordance with other companies in

contestada

Tamarisk Company began operations in 2018 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2020, in accordance with other companies in its industry, Tamarisk changed its inventory pricing to FIFO. The pretax income data is reported below.
Year Weighted-Average FIFO
2018 $373,800 $403,300
2019 391,900 434,700
2020 412,800 471,500
A) What is Cullumber’s net income in 2017? Assume a 35% tax rate in all years.
B) Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.
C) Show comparative income statements for Cullumber Company, beginning with income before income tax, as presented on the 2017 income statement.

Respuesta :

72,300 x 0.35= $25,303

Net of cumulative effect = Total ndifference before tax - total income tax= $72,300- $25,303= $46,997

c.comparative income statements for Cullumber Company, beginning with income before income tax, as presented on the 2017 you mean 2020  income statement.

                                           2020         2019      2018

Income before Income Tax $471,500 $434,700 $403,300

Income tax at 35%)           165,025    152,145,    141,155

Net Income                    $306,475    $282,555  $262,155 (Income before tax -Income tax)

     

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