In 2020, Silk sold Proform inventory costing $30,000 for $50,000. As of 12/31/20, Proform had resold only 28% of the inventory (72% of the gross profits associated with Silk's sale remained in inventory). In 2021, Proform purchased $80,000 of inventory from Silk, with Silk's cost for this inventory equaling $40,000. At the end of 2021, Proform held $28,000 of the Silk 2021 purchases in its inventory and none of the 2020 purchases. I need help figuring out the changes in deferred profit for 2020 and 2021.

In 2020, Silk sold Proform inventory costing $30,000 for $50,000. As of 12/31/20, Proform had resold only 28% of the inventory (72% of the gross profits associated with Silk's sale remained in inventory). In 2021, Proform purchased $80,000 of inventory from Silk, with Silk's cost for this inventory equaling $40,000. At the end of 2021, Proform held $28,000 of the Silk 2021 purchases in its inventory and none of the 2020 purchases. I need help figuring out the changes in deferred profit for 2020 and 2021.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 13RE: Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a...

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Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
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