devry acct312 week 5 homework assignment

Week Five – Homework Exercises E20-1, E20-10, E20-17, and
E20-24

E20-1 “During
2011 (its first year of operations) and 2012, Batali Foods used the FIFO
inventory costing method for both financial reporting and tax purposes. At the
beginning of 2013, Batali decided to change to the average method for both
financial reporting and tax purposes.

Income components before income tax for 2013, 2012, and 2011
were as follows ($ in millions):”

2013 2012 2011
Revenues $420
$390 $380
Cost of goods sold (FIFO) (46) (40) (38)
Cost of goods sold (average) (62) (56) (52)
Operating expenses (254) (250) (242)

Dividends of $20 million were paid each year. Batali’s
fiscal year ends December 31.

Required: 1.
Prepare the journal entry at the beginning of 2013 to record the change in
accounting principle. (Ignore income taxes.)
2.
Prepare the 2013–2012 comparative income statements.
3.
Determine the balance in retained earnings at January 1, 2012, as Batali
reported previously using the FIFO method.
4.
Determine the adjustment to the January 1, 2012, balance in retained earnings
that Batali would include in the 2013–2012 comparative statements of retained
earnings or retained earnings column of the statements of shareholders’ equity
to revise it to the amount it would have been if Batali had used the average
method.

E20-10 For financial
reporting, Clinton Poultry Farms has used the declining-balance method of
depreciation for conveyor equipment acquired at the beginning of 2010 for
$2,560,000. Its useful life was estimated to be six years with a $160,000
residual value. At the beginning of 2013, Clinton decides to change to the
straight-line method. The effect of this change on depreciation for each year
is as follows ($ in 000s):

Year Straight-Line Declining Balance Difference
2010 $400 $852 $453

2011 400 569 169
2012 400 379 -21
$1,200 $1,801 $601

Required: 1.
Briefly describe the way Clinton should report this accounting change in the
2012–2013 comparative financial statements.
2.
Prepare any 2013 journal entry related to the change.

E20-17 Wardell
Company purchased a mini computer on January 1, 2011, at a cost of $40,000. The
computer has been depreciated using the straight-line method over an estimated
five-year useful life with an estimated residual value of $4,000. On January 1,
2013, the estimate of useful life was changed to a total of 10 years, and the
estimate of residual value was changed to $900.

Required: 1.
Prepare the appropriate adjusting entry for depreciation in 2013 to reflect the
revised estimate.
2.
Repeat requirement 1 assuming that the company uses the
sum-of-the-years’-digits method instead of the straight-line method.

E20-24

For each of the following inventory errors occurring in 2013,
determine the effect of the error on 2013’s cost of goods sold, net income,
and retained earnings. Assume that the error is not discovered until 2014 and
that a periodic inventory system is used. Ignore income taxes.