Butler Products decided to change inventory methods on January 1,2016 to more effectively report its results of operations.In the past,management has measured its ending inventories by the average-cost method and they now believe that FIFO is a better representation of its financial position and profitability.Butler's tax rate is 35% for all years. Which one of the following journal entries correctly records the change in the accounting principle?
A)No journal entry need for prospective application of the change in principle.
B) Inventory 55,000
C) Retained Earnings-Prior Period Adj. 35,750
D) Inventory 50,000

Question

Butler Products decided to change inventory methods on January 1,2016 to more effectively report its results of operations.In the past,management has measured its ending inventories by the average-cost method and they now believe that FIFO is a better representation of its financial position and profitability.Butler's tax rate is 35% for all years.  Which one of the following journal entries correctly records the change in the accounting principle?
A)No journal entry need for prospective application of the change in principle. 
B) Inventory 55,000 
C) Retained Earnings-Prior Period Adj. 35,750 
D) Inventory 50,000

Quizplus · Accepted Answer

The Answer of Butler Products decided to change inventory methods on January 1,2016 to more effectively report its results of operations.In the past,management has measured its ending inventories by the average-cost method and they now believe that FIFO is a better representation of its financial position and profitability.Butler's tax rate is 35% for all years.  Which one of the following journal entries correctly records the change in the accounting principle?
A)No journal entry need for prospective application of the change in principle. 
B) Inventory 55,000 
C) Retained Earnings-Prior Period Adj. 35,750 
D) Inventory 50,000

Butler Products Decided to Change Inventory Methods on January 1,2016