Assignment Gradebook ORION Downloadable eTextbook nt KKEENE PRINTER VERSION -BAC

Question

Assignment Gradebook ORION Downloadable eTextbook nt KKEENE PRINTER VERSION -BACK Additional Problem 14 Metlock Corporation began operations on January 1, 2017. For the first year of its operations, the company's controller (who had taken only one introductory accounting course) used the LIFO method of costing inventories. At the end of the company's second year (i.e, December 31, 2018), the company decided to have its financial statements audited, during which the external auditor informed Metlock that LIFO was not an allowable accounting policy choice in Canada. As a result, Metlock changed from LIFO to FIFo at the end of 2018. Following is information regarding the inventory balances at the end of 2017 and 2018: Year FIFO LIFO 2017 $151,500 $142,000 2018 279,000 260,000 Prepare the necessary journal entry to record the correction of the accounting error. Assume that year-end adjusting entries have been made, but the 2018 books have not yet been dosed. Assume an income tax rate of 20%.( Credit account titles are automatically indented when the amount is entered. Do not indent manually. I no entry is required, select "No Entry for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit LIST OF ACCOUNTS 1247 AM

Explanation / Answer

Items

Account titles and explanations

Debit ($)

Credit ($)

For 2017

Inventories (151500 - 142000)

9500

Retained earnings (9500 - 1900)

7600

Provision for income tax (9500 x 20%)

1900

(Being the value of closing inventories adjusted against the retained earnings)

For 2018

Profit and loss account

9500

Inventories

9500

(Being the opening stock of 2018 correctly valued)

Inventories (279000 - 260000)

19000

Profit and loss account

19000

(Being the closing inventory adjusted at FIFO)

Items

Account titles and explanations

Debit ($)

Credit ($)

For 2017

Inventories (151500 - 142000)

9500

Retained earnings (9500 - 1900)

7600

Provision for income tax (9500 x 20%)

1900

(Being the value of closing inventories adjusted against the retained earnings)

For 2018

Profit and loss account

9500

Inventories

9500

(Being the opening stock of 2018 correctly valued)

Inventories (279000 - 260000)

19000

Profit and loss account

19000

(Being the closing inventory adjusted at FIFO)

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