Change in accounting principle In early 2016, Orange corporation changed its met

Question

Change in accounting principle In early 2016, Orange corporation changed its method of inventory pricing from weighted-average to FIFO. Net income computed on a weighted-average basis as compared to a FIFO basis for the four years involved is: (Ignore income taxes) A. Since 2016's books are still open, make the entry for 2016 to bring 2016's beginning accounts to the correct amount If orange is presenting 2016, 2015, and 2014 comparative financial statements, and 2013's ending balance of retained earning was $845,00 What would be sparrow's adjusted beginning balance of retained earning for 2014? If orange is presenting 2016, 2015 and 2014 comparative financial statements, net income for 2014 would be?

Explanation / Answer

Answer to Point 1

Retained Earning Dr 1,900

to Inventory 1,900

(As the Net Income is reducing, during the startig of 2016, it will reduce Retained Earning & inventory by $ 1,900

Answer to Point 2(8

The Balance of Retained Earning in the beginning of 2014 will be (8,45,000-3,100) i.e. 8,41,900

Answer to Point 3

The Net income for 2014 would be 75000

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