Cambi Company began operations on January 1, 2012. In the second quarter of 2013, it adopted the FIFO method of inventory valuation. In the past, it used the LIFO method. The company’s interim income statements as originally reported under the LIFO method follow:
| 2012 | 2013 | |||
1stQ | 2ndQ | 3rdQ | 4thQ | 1stQ | |
Sales | $10,000 | $12,000 | $14,000 | $16,000 | $18,000 |
Cost of goods sold (LIFO) | 4,000 | 5,000 | 5,800 | 7,000 | 8,500 |
Operating expenses | 2,000 | 2,200 | 2,600 | 3,000 | 3,200 |
Income before income taxes | $ 4,000 | $ 4,800 | $ 5,600 | $ 6,000 | $ 6,300 |
Income taxes (40%) | 1,600 | 1,920 | 2,240 | 2,400 | 2,520 |
Net income | $ 2,400 | $ 2,880 | $ 3,360 | $ 3,600 | $ 3,780 |
If the FIFO method had been used since the company began operations, cost of goods sold in each of the previous quarters would have been as follows:
| 2012 | 2013 | |||
| 1stQ | 2ndQ | 3rdQ | 4thQ | 1stQ |
Cost of goods sold (FIFO) | $3,800 | $4,600 | $5,200 | $6,000 | $7,400 |
Sales for the second quarter of 2013 are $20,000, cost of goods sold under the FIFO method is $9,000, and operating expenses are $3,400. The effective tax rate remains 40 percent. Cambi Company has 1,000 shares of common stock outstanding.
Prepare a schedule showing the calculation of net income and earnings per share that Cambi reports for the three-month period and the six-month period ended June 30,2013.
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