Ch22 solutions1-2-9-16-CA1

Ch22 solutions1-2-9-16-CA1 - CHAPTER 22 Accounting Changes...

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CHAPTER 22
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Accounting Changes and Error Analysis SOLUTIONS TO EXERCISES EXERCISE 22-1 (10–15 minutes) (a) The net income to be reported in 2008, using the retrospective approach, would be computed as follows: Income before income tax $700,000 Income tax (35% X $700,000) 245,000 Net income $455,000 (b) Construction in Process. ....................................... 190,000 Deferred Tax Liability ($190,000 X 35%). ........ 66,500 Retained Earnings. ......................................... 123,500* *($190,000 X 65% = $123,500) EXERCISE 22-2 (10–15 minutes) (a) Inventory. ..................................................................... 14,000* Retained Earnings. .............................................. 14,000 *($19,000 + $23,000 + $25,000) – ($15,000 + $18,000 + $20,000) (b) Net Income (FIFO) 2005 $19,000 2006 23,000 2007 25,000 (c) Inventory. ..................................................................... 24,000* Retained Earnings. ............................................. 24,000 *($19,000 + $23,000 + $25,000) – ($12,000 + $14,000 + $17,000)
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Ch22 solutions1-2-9-16-CA1 - CHAPTER 22 Accounting Changes...

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