[Solved by Experts] Blago Wholesale Company Began

[Solved by Experts] Blago Wholesale Company Began

Blago Wholesale Company began operations on January 1, 20X1, and uses the average cost method in costing its inventory. Management is contemplating a change to the FIFO method in 20X2 and is interested in determining how such a change will affect net income. Accordingly, the following information has been developed:

                                   20X1                      20X2

Final inventory:

     Average cost     $150,000                  $255,000 

     FIFO                   160,000                     270,000 

Condensed income statements for Blago Wholesale appear below:

                                                                                                                                   20X1                      20X2

Sales                                                                                                                 $1,000,000              $1,200,000 

Cost of goods sold                                                                                          600,000                       720,000 

Gross profit                                                                                                        400,000                       480,000 

Selling, general, and administrative                                                               250,000                      275,000 

Net income                                                                                                        $150,000                   $205,000 

Required:

Based on this information, what would 20X2 net income be after the change to the FIFO method? Ignore any income tax effects of this change in accounting method.

 

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