Reference no: EM132316077

Question

Air Parts Example

At the beginning of 2016, Air Parts Corp. changed from LIFO to FIFO for

inventory costing. Cost of goods sold under LIFO for the last two years was (in millions):

2014: $405

2015: $420

Cost of goods sold under FIFO would have been:

2014: $360

2015: $365

Prior to 2014, the cost of goods sold would have been lower by $300 under FIFO. Air Parts pays income taxes at a rate of 40%. Retained earnings on January 1, 2014, was $700 and inventory was $500.

What journal entry should Air Parts make at the beginning of 2016 to record the change in inventory costing methods? *

For 2016, cost of goods sold under LIFO is $430 and under FIFO it is $370. What cost of goods sold amounts should Air Parts report for 2014, 2015 and 2016 on its comparative income statement?

The response must be typed, single spaced, must be in times new roman font (size 12) and must follow the APA format.