The Jack Company Began Its Operations on January 1, 2016

question 63

Multiple Choice

The Jack Company began its operations on January 1, 2016, and used the LIFO method of accounting for its inventory. On January 1, 2018, Jack Company adopted FIFO in accounting for its inventory. The following information is available regarding cost of goods sold for each method: LIFO Cost of FIFO Cost of
Year Goods Sold Goods Sold
2016 $470,000 $350,000
2017 690,000 450,000
2018 700,000 540,000
Assuming a tax rate of 35% and the same accounting change adopted for tax purposes, how would the effect of the accounting change be reported in opening retained earnings on the 2018 financial statements?

• A) +$360,000 restatement
• B) +$234,000 restatement
• C) -$700,000 restatement
• D) no restatement

---

Definitions:

Federal Circuit Courts of Appeal

The Federal Circuit Courts of Appeal are intermediate appellate courts in the United States responsible for reviewing decisions from federal district courts within their geographic circuit.

Limited Jurisdiction

A legal term referring to courts that are restricted in the types of legal matters they can decide, usually based on the subject matter, the amount in controversy, or the geographical area.

Case or Controversy

A term used in constitutional law referring to a requirement for federal courts to adjudicate actual disputes, not hypothetical scenarios.

Legal Dispute

A disagreement that has escalated to a formal lawsuit or arbitration process.