Gordon Company started operations on January 1, 2009, and has used the FIFO meth
ID: 2469940 • Letter: G
Question
Gordon Company started operations on January 1, 2009, and has used the FIFO method of inventory valuation since its inception. In 2014, it decides to switch to the average cost method. You are provided with the following information.
Net Income
Retained Earnings
(Ending Balance)
Under FIFO
Under Average-Cost
Under FIFO
(a) What is the beginning retained earnings balance at January 1, 2011, if Gordon prepares comparative financial statements starting in 2011?
(b) What is the beginning retained earnings balance at January 1, 2014, if Gordon prepares comparative financial statements starting in 2014?
(c) What is the beginning retained earnings balance at January 1, 2015, if Gordon prepares single-period financial statements for 2015?
(d) What is the net income reported by Gordon in the 2014 income statement if it prepares comparative financial statements starting with 2012?
2012
2013
2014
Net Income
Retained Earnings
(Ending Balance)
Under FIFO
Under Average-Cost
Under FIFO
2009 $101,610 $92,780 $100,770 2010 70,480 64,500 160,350 2011 89,130 79,760 235,380 2012 119,770 129,660 340,850 2013 299,940 292,280 589,910 2014 304,820 309,090 779,810Explanation / Answer
(a)
Beginning retained earnings balance at January 1, 2011, if Gordon prepares comparative financial statements starting in 2011 as given in question is 160,350
(b)
Beginning retained earnings balance at January 1, 2014, if Gordon prepares comparative financial statements starting in 2014 is 589,910
(c)
Beginning retained earnings balance at January 1, 2015, if Gordon prepares single-period financial statements for 2015.
(d)
Net income reported by Gordon in the 2014 income statement if it prepares comparative financial statements starting with 2012
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