HW_7 Accounting Changes with solution

HW_7 Accounting Changes with solution - Homework #7:...

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Homework #7: Accounting changes/errors (Ch 22), due on March 24. Problem 1: Red Inc. began operations January 1, 2010. In 2012 it changed its method of accounting for inventories from the average cost method to first-in, first-out (FIFO). If ending inventory had been determined under each of these two methods for both years, the results would have been: The company's income for 2011 and 2010 under average cost was $83,500 and $78,600, respectively. The income tax rate for Red is 30%. Required : Determine restated net income for Red Inc. for 2011 and 2010, after retrospectively applying the change in accounting principle. Solution to Problem 1:
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Problem 2: Black Corporation began operations January 1, 2010, purchasing equipment for $200,000. The equipment is estimated to have a five year useful life with no residual value. In 2012, Black changed its method of depreciating equipment from double-declining balance to straight-line. If depreciation expense had been computed under each of these two methods for
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This note was uploaded on 02/22/2012 for the course ACCT 401 taught by Professor Winchel during the Spring '10 term at South Carolina.

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HW_7 Accounting Changes with solution - Homework #7:...

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