Determine what numbers will be reported for inventory

Reference no: EM132218595

Question - During 2018, Jean Bedard Company decided to change the inventory costing method used from LIFO to FIFO. Assume that they also made this change for income tax purposes. This is a realistic assumption due to the IRS LIFO conformity rule.

During 2017, Jean Bedard declared dividends in the amount of $300,000. In 2018, this amount was $200,000. The 2017 LIFO basis net income was $4,000,000. The 2018 FIFO net income was $4,500,000. The marginal tax rate is 20%. There are 700,000 common shares outstanding.

	LIFO	FIFO
Inventory as of 1/1/2017	$1,000,000	$1,500,000
Inventory as of 12/31/2017	2,000,000	3,500,000
Inventory as of 12/31/2018	2,200,000	3,800,000

REQUIRED -

1. Give the entry(s) to record the effect of the change.

2. Determine what numbers will be reported for the 2018 comparative (2017 and 2018) financial statements for inventory, retained earnings, net income, and earnings per share. Assume that the January 1, 2017 retained earnings balance under LIFO is $6,000,000.

Reference no: EM132218595

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