During 2022 (its first year of operations) and 2023, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2024, Fieri decided to change to the average method for both financial reporting and tax purposes. Income components before income tax for 2022, 2023, and 2024 were as follows: ($ in millions) 2022 2023 2024 Revenues $ 430 $ 440 $ 470 Cost of goods sold (FIFO) (43) (45) (51) Cost of goods sold (average) (62) (66) (72) Operating expenses (262) (270) (274) Dividends of $24 million were paid each year. Fieri’s fiscal year ends December 31. Questions 1 & 2 Determine the balance in retained earnings at January 1, 2023, as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2023 using average method instead of FIFO method.

During 2022 (its first year of operations) and 2023, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2024, Fieri decided to change to the average method for both financial reporting and tax purposes. Income components before income tax for 2022, 2023, and 2024 were as follows: ($ in millions) 2022 2023 2024 Revenues $ 430 $ 440 $ 470 Cost of goods sold (FIFO) (43) (45) (51) Cost of goods sold (average) (62) (66) (72) Operating expenses (262) (270) (274) Dividends of $24 million were paid each year. Fieri’s fiscal year ends December 31. Questions 1 & 2 Determine the balance in retained earnings at January 1, 2023, as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2023 using average method instead of FIFO method.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 5E: Fava Company began operations in 2018 and used the LIFO inventory method for both financial...

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($ in millions)	2022	2023	2024
Revenues	$ 430	$ 440	$ 470
Cost of goods sold (FIFO)	(43)	(45)	(51)
Cost of goods sold (average)	(62)	(66)	(72)
Operating expenses	(262)	(270)	(274)

Questions

1 & 2 Determine the balance in retained earnings at January 1, 2023, as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2023 using average method instead of FIFO method.

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

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