Question - Teal Company began operations on January 1, 2015, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2018. The following information is available for the years 2015-2017.
Net Income Computed Using
Average-Cost Method
FIFO Method
LIFO Method
2015 $16,000 $19,100 $12,080
2016 18,040 20,820 14,100
2017 20,010 24,800 16,840
(a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2018.
(b) Determine net income to be reported for 2015, 2016, and 2017, after giving effect to the change in accounting principle.
(c) Assume Teal Company used the LIFO method instead of the average cost method during the years 2015-2017. In 2018, Teal changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.