Baker Corporation Changed from the LIFO Method to the FIFO

question 38

Multiple Choice

Baker Corporation changed from the LIFO method to the FIFO method for inventory valuation during 2021. Baker has an effective income tax rate of 35% and 100,000 shares of common stock issued and outstanding. The following additional information is available: Assuming Baker makes the change in the first quarter of 2021, how much is reported as net income for the first quarter of 2021?

• A) $492,000.
• B) $494,800.
• C) $500,000.
• D) $505,200.
• E) $527,950.

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Definitions:

Endorsement

A signature or statement of support for a person, product, or service, often used in the context of financial instruments to transfer rights to another party.

Transferee

The party to whom rights, titles, or interests are transferred or assigned from another party.

Receiving

The process of accepting delivery of goods, verifying them against purchase orders, and formally acknowledging possession.

Cashier's Check

A check issued by a bank, drawn on its own funds rather than that of a personal account, ensuring the availability of funds.