Question

SIV Vownloadable eTextbook gnment CALCULATOR MESSAGE HY INSTRUCTOR FULL SCREEN PRINTER VERSION BACK NEXT Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Monty 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. Monty'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 2017 2016 Sales Cost of goods sold Operating expenses Income before profit-sharing Profit-sharing expense Net income $3,070 1,180 980 910 1,050 980 1,040 104 FIFO Basis 2017 2016 $3,070 $3,070 1,060 990 980 980 1,030 1,100 109 104 $921 $996 91 $819 $936 Answer the following questions. If comparative Income statements are prepared, What net income should Monty report in 2016 and 2017 (Round answers to o decimal places, e.. 125.) 2017 2016 Net income

Answer 1

If comparative income statements are prepared, Monty Company should report FIFO based comparative income statement in 2016 & 2017. 2017 921 2016 996 Net Income Retained Earning Statement 936 Retained Earnings at January 1, 2017 Difference between Net Income of 2016 by FIFO method and LIFO method ( 996-936) Adjusted Retained earnings (+) Net Income of 2017 FIFO (-) Dividend Retained Earnings at December 31, 2017 60 996 921 480 1437