Exercise 22-5 (Part Level Submission) Presented below are income statements prep

Question

Exercise 22-5 (Part Level Submission) Presented below are income statements prepared on a LIFO and FIFO basis for Sunland Company, which started operations on January 1, 2016. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2017. The FIFO income statement is computed in accordance with the requirements of GAAP. Sunland's profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored. LIFO Basis FIFO Basis 2017 2016 2017 2016 Sales Cost of goods sold Operating expenses Income before profit-sharing Profit-sharing expense Net income $2,910 $2,910 $2,910 $2,910 930 1,040 1,040 1,040 940 85 $855 1,160 1,020 1,130 1,040 710 71 $639 850 85 $765 740 83 $657 Answer the following questions. Your answer is correct. If comparative income statements are prepared, what net income should Sunland report in 2016 and 2017? (Round answers to O decimal places, e.g. 125.) 2017 2016 Net income 657 855

Explanation / Answer

Sunland Company Retained earnings Statement Retained earning, January 1 (reported) $     765 Cumulative effect of change to FIFO ($855 - $765) $       90 Retained earnings, January 1 (adjusted) $     855 Add: Net Income $     657 Deduct: Dividends $     510 Retained earning, December 31 $ 1,002

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.