UTRILLO INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 2013 2014 2015 2016 2017 Sales-net $13,964 $15,506 $16,673 $18,221 $18,898 Cost of goods sold Beginning inventory Purchases 1,000 13,000 (1,100) 1,100 13,900 1,237 17,100 (1,369) 1,000 15,000 (1,115) 1,115 15,900 (1,237) Ending inventory (1,000) Total 12,900 14,000 14,885 15,778 16,968 Gross profit Administrative expenses 1,064 1,506 1,788 2,443 1,930 700 763 832 907 989 Income before taxes 364 743 956 1,536 941 Income taxes (50%) 182 372 478 768 471 Net income 182 371 478 768 470 Retained earnings-beginning 1,206 1,388 1,759 2,237 3,005 Retained earnings–ending $ 1,388 $ 1,759 $ 2,237 $ 3,005 $ 3,475 Earnings per share $1.82 $3.71 $4.78 $7.68 $4.70 SCHEDULE OF INVENTORY BALANCES USING AVERAGE-COST METHOD FOR THE YEARS ENDED MAY 31 2012 2013 2014 2015 2016 2017 $1,010 $1,124 $1,101 $1,270 $1,500 $1,720

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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(Change in Principle—Inventory—Periodic) The management of Utrillo Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if Utrillo changed its method of pricing inventory from last-in, first-out (LIFO) to average-cost in 2017. Given below is the 5-year summary of income under LIFO and a schedule of what the inventories would be if stated on the average-cost method.

Check the below image for 5-year summary

Instructions
Prepare comparative statements for the 5 years, assuming that Utrillo changed its method of inventory pricing to average-cost. Indicate the effects on net income and earnings per share for the years involved. Utrillo Instruments started business in 2012. (All amounts except EPS are rounded up to the nearest dollar.)

UTRILLO INSTRUMENT COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED MAY 31
2013
2014
2015
2016
2017
Sales-net
$13,964
$15,506
$16,673
$18,221
$18,898
Cost of goods sold
Beginning inventory
Purchases
1,000
13,000
(1,100)
1,100
13,900
1,237
17,100
(1,369)
1,000
15,000
(1,115)
1,115
15,900
(1,237)
Ending inventory
(1,000)
Total
12,900
14,000
14,885
15,778
16,968
Gross profit
Administrative expenses
1,064
1,506
1,788
2,443
1,930
700
763
832
907
989
Income before taxes
364
743
956
1,536
941
Income taxes (50%)
182
372
478
768
471
Net income
182
371
478
768
470
Retained earnings-beginning
1,206
1,388
1,759
2,237
3,005
Retained earnings–ending
$ 1,388
$ 1,759
$ 2,237
$ 3,005
$ 3,475
Earnings per share
$1.82
$3.71
$4.78
$7.68
$4.70
SCHEDULE OF INVENTORY BALANCES USING AVERAGE-COST METHOD
FOR THE YEARS ENDED MAY 31
2012
2013
2014
2015
2016
2017
$1,010
$1,124
$1,101
$1,270
$1,500
$1,720
Transcribed Image Text:UTRILLO INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 2013 2014 2015 2016 2017 Sales-net $13,964 $15,506 $16,673 $18,221 $18,898 Cost of goods sold Beginning inventory Purchases 1,000 13,000 (1,100) 1,100 13,900 1,237 17,100 (1,369) 1,000 15,000 (1,115) 1,115 15,900 (1,237) Ending inventory (1,000) Total 12,900 14,000 14,885 15,778 16,968 Gross profit Administrative expenses 1,064 1,506 1,788 2,443 1,930 700 763 832 907 989 Income before taxes 364 743 956 1,536 941 Income taxes (50%) 182 372 478 768 471 Net income 182 371 478 768 470 Retained earnings-beginning 1,206 1,388 1,759 2,237 3,005 Retained earnings–ending $ 1,388 $ 1,759 $ 2,237 $ 3,005 $ 3,475 Earnings per share $1.82 $3.71 $4.78 $7.68 $4.70 SCHEDULE OF INVENTORY BALANCES USING AVERAGE-COST METHOD FOR THE YEARS ENDED MAY 31 2012 2013 2014 2015 2016 2017 $1,010 $1,124 $1,101 $1,270 $1,500 $1,720
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