Tim Mattke Company began operations in 2012 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2014, in accordance with ot
Tim Mattke Company began operations in 2012 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2014, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below.
\r\nWeighted-
\r\nYear Average FIFO
\r\n2012 $370,000 $395,000
\r\n2013 390,000 430,000
\r\n2014 410,000 450,000
\r\nInstructions
\r\n(a) What is Mattke’s net income in 2014? Assume a 35% tax rate in all years.
\r\n(b) Compute the cumulative effect of the change in accounting principle from weighted-average to
\r\nFIFO inventory pricing.
\r\n(c) Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2014 income statement.