The Jack Company began its operations on January 1, 2014, and used the LIFO method of accounting for its inventory. On January 1, 2016, Jack Company adopted FIFO in accounting for its inventory. The following information is available regarding cost of goods sold for each method:

Assuming a tax rate of 35% and the same accounting change adopted for tax purposes, how would the effect of the accounting change be reported in opening retained earnings on the 2016 financial statements?
A) +$360,000 restatement
B) +$234,000 restatement
C) no restatement
D) ($700,000) restatement

Question

The Jack Company began its operations on January 1, 2014, and used the LIFO method of accounting for its inventory. On January 1, 2016, Jack Company adopted FIFO in accounting for its inventory. The following information is available regarding cost of goods sold for each method:

Assuming a tax rate of 35% and the same accounting change adopted for tax purposes, how would the effect of the accounting change be reported in opening retained earnings on the 2016 financial statements?
A) +$360,000 restatement 
B) +$234,000 restatement 
C) no restatement 
D) ($700,000) restatement

Quizplus · Accepted Answer

The Answer of The Jack Company began its operations on January 1, 2014, and used the LIFO method of accounting for its inventory. On January 1, 2016, Jack Company adopted FIFO in accounting for its inventory. The following information is available regarding cost of goods sold for each method:

Assuming a tax rate of 35% and the same accounting change adopted for tax purposes, how would the effect of the accounting change be reported in opening retained earnings on the 2016 financial statements?
A) +$360,000 restatement 
B) +$234,000 restatement 
C) no restatement 
D) ($700,000) restatement

The Jack Company Began Its Operations on January 1, 2014