Indigo, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow a

Question

Indigo, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2017. The increase in the prior year's income before taxes is $1,265,000. The tax rate is 35%. Prepare Indigo's 2017 journal entry to record the change in accounting principle. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

Explanation / Answer

Account titles and explanation Debit Credit Inventory $1,265,000 Deferred Tax Liability($1,265,000 x 35%) $442,750 Retained Earnings $822,250

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