change in accounting principle kamila stores decided to change from lifo to fifo as 692994

Aug 30, 2021 | Uncategorized

Change in Accounting Principle

Kamila Stores decided to change from LIFO to FIFO as of January 1, 2008. The change is being made for both book and tax purposes.

 

Net Income

Excess of LIFO Cost of

 

 

Computed

Goods Sold over

Income Effect

Year

Using LIFO

FIFO Cost of Goods Sold

(Net of Tax)

Prior to 2006                   

 

$12,500

$ 7,500

2006                         

$62,500

6,250

3,750

2007                         

54,500

7,500

4,500

2008                         

78,000

11,250

6,750

 

 

 $37,500

 $22,500

1. Using LIFO, the beginning retained earnings as of January 1, 2006, was $173,000.

Compute adjusted beginning retained earnings, using FIFO, as of January 1, 2006.

2. The 3 year comparative income statement for 2008 includes net income for 2006, 2007, and 2008. In that comparative income statement, prepared after the change for FIFO has been adopted, what amount of net income will be reported for each year?