Exercise 4-14 (Part Level Submission) Headland Company began operations in 2015

Question

Exercise 4-14 (Part Level Submission)

Headland Company began operations in 2015 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2017, in accordance with other companies in its industry, Headland changed its inventory pricing to FIFO. The pretax income data is reported below.

Year

Weighted-Average

FIFO

Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.

Year

Weighted-Average

FIFO

2015 $390,600 $414,000 2016 410,000 421,500 2017 414,700 473,400

Explanation / Answer

Cumulative effect for years prior to 2017 Year Weighted Average FIFO Diffrence Tax Rate (35%) Net Effect 2015             390,600.00        414,000.00            234,00.00 2016             410,000.00        421,500.00 11,500.00 Total 34,900.00       12,215.00         22,685.00

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