Baker Corporation Changed from the LIFO Method to the FIFO

question 54

Multiple Choice

Baker Corporation changed from the LIFO method to the FIFO method for inventory valuation during 2013. Baker has an effective income tax rate of 30 percent 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 2013 and that $400,000 net income is earned during the second quarter, how much is reported as net income for the second quarter of 2013?

• A) $400,000.
• B) $405,200.
• C) $427,950.
• D) $894,850.
• E) $905,200.

---

Definitions:

Current Asset

Resources anticipated to be changed into cash, disposed of, or used up either within a year or over the course of the business's usual operational cycle, depending on which timeframe extends further.

Revenue

The total amount of income generated by the sale of goods or services related to a company's core business activities.

Net Income

The total profit of a company after all expenses, including taxes and operating expenses, have been subtracted from total revenue.

Accounts Payable

Money owed by a company to its creditors for goods and services that have been received but not yet paid for.