Change in Accounting Principles

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Respond to the following. Submit journal entries in a table in MS
Word and written segments in the same Word document. Do not submit two
separate documents, as only one document can be accepted. For written
answers, please make sure your responses are well written, formatted per APA and have proper citations, if applicable.

Garner Company began operations on January 1, 2015, and uses the
average cost method of pricing inventory. Management is contemplating a
change in inventory methods for 2018. The following information is
available for the years 2015–2017.

Net Income Computed Using

Average Cost Method

FIFO Method

LIFO Method

2015

$15,000

$20,000

$12,000

2016

18,000

24,000

14,000

2017

20,000

27,000

17,000

On January 1, 2017, Garner issued 10-year,
$200,000 face value, 6% bonds, at par. Each $1,000 bond is convertible
into 30 shares of Garner common stock. The company has had 10,000 common
shares outstanding throughout its life. None of the bonds have been
exercised as of the end of 2018. (Ignore tax effects.)

Use the link included at the bottom of this page to download the
Excel Template containing the spreadsheet you will need for this
exercise.

  1. Using the spreadsheet Journal Entries, prepare the journal entry
    necessary to record a change from the average cost method to the FIFO
    method in 2018.
  2. Assume Garner Company used
    the LIFO method instead of the average cost method during the years
    2015–2017. In 2018, Garner changed to the FIFO method. Using the
    spreadsheet Journal Entries, prepare the journal entry necessary to
    record the change in accounting principle.
  3. Assume Garner had the
    accounting change described in (2); Garner’s income in 2018 was $30,000.
    Compute basic and diluted earnings per share for Garner Company for
    2018. Show how income and EPS will be reported for 2018 and 2017.
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