Worthington Inc. began operations January 1, 2008. In 2010 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 2009 and 2008 under average cost was $83,500 and $78,600, respectively. The income tax rate for Worthington is 30%.
Required: Determine restated net income for Worthington Inc. for 2009 and 2008, after the retrospectively applying the change in accounting principle.
$$\begin{array} { l r r }
\text { Ending inventory: } & \underline { 2009 } & \underline { 2008 } \
\text { Average cost } & \$ 40,000 & \$ 36,000 \
\text { FIFO } & 50,000 & 42,000
\end{array}$$

Question

Worthington Inc. began operations January 1, 2008. In 2010 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 2009 and 2008 under average cost was $83,500 and $78,600, respectively. The income tax rate for Worthington is 30%.
Required: Determine restated net income for Worthington Inc. for 2009 and 2008, after the retrospectively applying the change in accounting principle.
 $$\begin{array} { l r r } 
\text { Ending inventory: } & \underline { 2009 } & \underline { 2008 } \
\text { Average cost } & \$ 40,000 & \$ 36,000 \
\text { FIFO } & 50,000 & 42,000
\end{array}$$

Quizplus · Accepted Answer

The Answer of Worthington Inc. began operations January 1, 2008. In 2010 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 2009 and 2008 under average cost was $83,500 and $78,600, respectively. The income tax rate for Worthington is 30%.
Required: Determine restated net income for Worthington Inc. for 2009 and 2008, after the retrospectively applying the change in accounting principle.
 $$\begin{array} { l r r } 
\text { Ending inventory: } & \underline { 2009 } & \underline { 2008 } \
\text { Average cost } & \$ 40,000 & \$ 36,000 \
\text { FIFO } & 50,000 & 42,000
\end{array}$$