Return to question 6 The Rockwell Corporation uses a periodic inventory system a

Question

Return to question 6 The Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2018, the company decided to change to the average cost method. Data for 2018 are as follows: 14.28 points Beginning inventory, FIFO (6,200 units $42.00) Purchases: $260,400 $297,600 6,200 units $48.00 6,200 units $52.00 Cost of goods available for sale Sales for 2018 (10,400 units $82.00) 322,400620,000 $880,400 $852,800 Additional information: I. The company's effective income tax rate is 30% for all years. 2. If the company had used the average cost method prior to 2018, ending inventory for 2017 would have been $235,600. 3. 8,200 units remained in inventory at the end of 2018. ud thejoual entry at the begining of 2018 to record the chng unnost of goods sold and inventory reported for 20187 Required 2. In the 2018-2016 comparative financial statements, what will be the amounts of cost of goods sold and inventory reported for 2018?

Explanation / Answer

1. Journal entry at the begnning of year 2018:

Retained Earning Account Dr. $ 17,360 -

Deferred Tax Assets Account Dr. $ 7,440 -

To Inventory Account - $ 24,800

(i.e, Being company changed Average cost method from FIFO cost method at inception of year 2018. So total $ 24,800 is less in inventory value. So deferred tax assets created for $ 7440.)

2. Amount of Cost of Goods Sold & Inventory reported in 2018 :

Note : Calculation

Note : Average Cost Method Rate : $ 138 / 3 = $ 46.

Cost of Goods Sold $ 8,55,600 Inventory $ 3,77,200

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