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Changes in Accounting Principles Assume a client operating on a calendar year used the weighted average method for inventory costing through the end of 2009, and that ending inventory at 12/31/2009 was $700. In 2010, the client changed to the FIFO method. Had the FIFO method been used, the inventory at 12/31/2009 would have been $900. Assume the change is also being made for tax purpose and that the client’s effective tax rate in 2009 and 2010 is 40%. Inventory DV LIFO Year Ending Inventory @ CY Price Price Index 2001 (base year) $20,000 1.00 2002 $23,100 1.05 2003 $27,250 1.09 2004 $27,600 1.15 2005 $32,400 1.20 Coupons Face value $500 Expiration date 12/31/X1 Handling fee paid to merchants 20% Normal time merchants take to process coupons: one month Payments to merchants in 20X9 Total coupons expected to be redeemed: 60% How to determine the unredeemed coupons liabilities? EPS: Weighted average outstanding common stock shares calculation On 1/1 100,000 shares of common stock are outstanding. On 4/1 80,000 shares are issued On 7/1 a 10% stock dividend is issued On 9/1 18,000 shares of treasury stock are repurchased On 12/31 a 2 for 1 stock split occurs. Calculate the weighted average number of shares of common stock outstanding at 12/31 TDR Assume the client has $500 note payable outstanding since 1/1/2009, with interest payments due at the end of each calendar year until the note matures. At 12/31/209, the client is unable to make the required annual interest payment, and the creditor agrees to restructure the debt by forgiving the missed payment, reducing the principal on the note to $400, and requiring 10%, interest payments on 12/31/2010 and 12/31/2011, with the note principal due 12/31/2011 Deferred Tax Example: The client has prepaid a $50 expense at the start of the year that is for the next 5 years. For accounting purpose the expense is $50/5=$10. For tax purpose, the client deduct all $50 expenses today. Curren