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Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2013. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2014. The FIFO income statement is computed in accordance with the requirements of GAAP. Kenseth's profit-sharing agreement with its employees indicates that the company will pay employees 5% of income before profit sharing. Income taxes are ignored. Sales Cost of goods sold Operating expenses Income before profit-sharing Profit-sharing expense Net income Net income xYour answer is incorrect. Try again. If comparative income statements are prepared, what net income should Kenseth report in 2013 and 2014? (Round answers to 0 decimal places, e.g. 125.) 2013 2014 LIFO Basis 2014 2014 2013 $3,800 $3,800 $3,800 1,117 1,047 1,100 1,200 1,200 1,483 1,553 1,200 1,500 75 $1,425 74 78 $1,409 $1,475 Retained Earnings, January 1, as reported # Cumulative Effect of Change to FIFO Add Net Income Less 1425 Retained Earnings, January 1, as adjusted Dividends Assume that Kenseth has a beginning balance of retained earnings at January 1, 2014, of $7,925 using the LIFO method. The company declared and paid dividends of $2,462 in 2014. Prepare the retained earnings statement for 2014, assuming that Kenseth has switched to the FIFO method. (Round answers to 0 decimal places, e.g. 125.) KENSETH COMPANY Retained Earnings Statement Retained Earnings, December 31 FIFO Basis # # 2013 $3,800 903 1,200 1,697 85 $1,612 1612 x 7925 2462

Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2013. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2014. The FIFO income statement is computed in accordance with the requirements of GAAP. Kenseth's profit-sharing agreement with its employees indicates that the company will pay employees 5% of income before profit sharing. Income taxes are ignored. Sales Cost of goods sold Operating expenses Income before profit-sharing Profit-sharing expense Net income Net income xYour answer is incorrect. Try again. If comparative income statements are prepared, what net income should Kenseth report in 2013 and 2014? (Round answers to 0 decimal places, e.g. 125.) 2013 2014 LIFO Basis 2014 2014 2013 $3,800 $3,800 $3,800 1,117 1,047 1,100 1,200 1,200 1,483 1,553 1,200 1,500 75 $1,425 74 78 $1,409 $1,475 Retained Earnings, January 1, as reported # Cumulative Effect of Change to FIFO Add Net Income Less 1425 Retained Earnings, January 1, as adjusted Dividends Assume that Kenseth has a beginning balance of retained earnings at January 1, 2014, of $7,925 using the LIFO method. The company declared and paid dividends of $2,462 in 2014. Prepare the retained earnings statement for 2014, assuming that Kenseth has switched to the FIFO method. (Round answers to 0 decimal places, e.g. 125.) KENSETH COMPANY Retained Earnings Statement Retained Earnings, December 31 FIFO Basis # # 2013 $3,800 903 1,200 1,697 85 $1,612 1612 x 7925 2462

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2013. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2014. The FIFO income statement is computed in accordance with the requirements of GAAP. Kenseth's profit-sharing agreement with its employees indicates that the company will pay employees 5% of income before profit sharing. Income taxes are ignored. Sales Cost of goods sold ✔ Operating expenses Income before profit-sharing Net income ✔ Profit-sharing expense Net income xYour answer is incorrect. Try again. If comparative income statements are prepared, what net income should Kenseth report in 2013 and 2014? (Round answers to 0 decimal places, e.g. 125.) ✔ 2014 Assume that Kenseth has a beginning balance of retained earnings at January 1, 2014, of $7,925 using the LIFO method. The company declared and paid dividends of $2,462 in 2014. Prepare the retained earnings statement for 2014, assuming that Kenseth has switched to the FIFO method. (Round answers to 0 decimal places, e.g. 125.) KENSETH COMPANY Retained Earnings Statement Retained Earnings, January 1, as reported Add LIFO Basis FIFO Basis 2014 2013 2014 2013 $3,800 $3,800 $3,800 $3,800 1,117 1,047 1,100 1,200 1,200 1,200 1,483 1,553 1,500 78 75 $1,475 $1,425 74 $1,409 Cumulative Effect of Change to FIFO Less 1425 Retained Earnings, January 1, as adjusted Net Income Dividends Retained Earnings, December 31 # 2013 # + 903 1,200 1,697 85 $1,612 1612 X DODAO ✔ 7925 2462
Transcribed Image Text:Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2013. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2014. The FIFO income statement is computed in accordance with the requirements of GAAP. Kenseth's profit-sharing agreement with its employees indicates that the company will pay employees 5% of income before profit sharing. Income taxes are ignored. Sales Cost of goods sold ✔ Operating expenses Income before profit-sharing Net income ✔ Profit-sharing expense Net income xYour answer is incorrect. Try again. If comparative income statements are prepared, what net income should Kenseth report in 2013 and 2014? (Round answers to 0 decimal places, e.g. 125.) ✔ 2014 Assume that Kenseth has a beginning balance of retained earnings at January 1, 2014, of $7,925 using the LIFO method. The company declared and paid dividends of $2,462 in 2014. Prepare the retained earnings statement for 2014, assuming that Kenseth has switched to the FIFO method. (Round answers to 0 decimal places, e.g. 125.) KENSETH COMPANY Retained Earnings Statement Retained Earnings, January 1, as reported Add LIFO Basis FIFO Basis 2014 2013 2014 2013 $3,800 $3,800 $3,800 $3,800 1,117 1,047 1,100 1,200 1,200 1,200 1,483 1,553 1,500 78 75 $1,475 $1,425 74 $1,409 Cumulative Effect of Change to FIFO Less 1425 Retained Earnings, January 1, as adjusted Net Income Dividends Retained Earnings, December 31 # 2013 # + 903 1,200 1,697 85 $1,612 1612 X DODAO ✔ 7925 2462
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