Johnston Controls Began Operation in 2017 Using FIFO Inventory Methods

question 53

Multiple Choice

Johnston Controls began operation in 2017 using FIFO inventory methods. In 2018, management decided they should have chosen LIFO to more accurately portray financial position and performance. The beginning 2018 inventory using FIFO was $200,000. Under the LIFO method the beginning inventory would have been $240,000. The adjustment to inventory for the accounting principle change for 2017 would be ________.

• A) $0
• B) $20,000 debit
• C) $40,000 credit
• D) $40,000 debit

Engage with interactive learning strategies to enhance critical thinking skills.

Recognize the importance of adhering to institutional guidelines and professional standards.

Employ critical thinking skills such as interpretation, evaluation, and self-regulation in nursing practice.

Identify and prioritize patient needs as part of the clinical decision-making process.

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Definitions:

Fixed Cost

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Product

Anything that can be offered to a market to satisfy the desire or need of a customer.

Average Collection Period

The average number of days it takes for a business to collect payments from its customers after a sale has been made.

Discount Policy

A company's strategy regarding the conditions under which discounts are offered to customers, affecting sales volume, revenue, and cash flows.