Reference no: EM132906306

HGF company started operations on January 1, 2019. Inventory was accounted for by using FIFO method. At the beginning of 2021, HGF changed to average method. The following information relating to inventory for years 2021 and 2020 are as follows: (Income tax rate was 30%)

                                            2021                       2020

FIFO ending inventory      360,000              440,000

Average ending inventory    320,000             350,000

Problem 1.) Comparing 2021 profit computation under FIFO method of inventory valuation to 2021 profit computation under average method of inventory valuation, you can conclude that:

A. Profit is 50,000 higher under average method of inventory valuation

B. Gross profit is 50,000 higher under FIFO method of inventory valuation

C. Sales figure would be the same

D. Cost of goods sold is higher under average method of inventory valuation

Problem 2.) What is the amount reported HGF's 2021 statement of changes in equity as an adjustment to beginning retained earnings of 2021?

A. 91,000

B. 0

C. 63,000

D. 35,000

Problem 3.) In restating the comparative 2020 statement of comprehensive income, 2020 profit is:

A.Decreased by 63,000

B. Increased by 63,000

C. Increased by 90,000

D. Decreased by 90,000