chapter 22.docx - Exercises 3 6 9 10 12 14 15 and 16 22.3(a...

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Exercises 3, 6, 9, 10, 12, 14, 15, and 16 22.3 (a) TAVERAS CO. Income Statement For the Year Ended December 31 LIFO 2018 2019 2020 Sales $3,000 $3,000 $3,000 Cost of goods sold 800 1,000 1,130 Operating expenses 1,000 1,000 1,000 Net income $1,200 $1,000 $ 870 Income Statement For the Year Ended December 31 FIFO 2018 2019 2020 Sales $3,000 $3,000 $3,000 Cost of goods sold 820 940 1,100 Operating expenses 1,000 1,000 1,000 Net income $1,180 $1,060 $ 900 (b) TAVERAS CO. Income Statement For the Year Ended December 31 2020 2019 As adjusted (Note A) Sales $3,000 $3,000 Cost of goods sold 1,100 940 Operating expenses 1,000 1,000 Net income $ 900 $1,060 (c) Note A: Change in Method of Accounting for Inventory Valuation On January 1, 2020, Taveras elected to change its method of valuing its inventory to the FIFO method, whereas in all prior years inventory was valued using the LIFO method. The new method of accounting for inventory was adopted because it better reflects the current cost of the inventory on the balance sheet and comparative financial statements
of prior years have been adjusted to apply the new method retrospectively.

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