(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 summaryInstructionsPrepare 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 COMPANYSTATEMENT OF INCOME AND RETAINED EARNINGSFOR THE YEARS ENDED MAY 3120132014201520162017Sales-net$13,964$15,506$16,673$18,221$18,898Cost of goods soldBeginning inventoryPurchases1,00013,000(1,100)1,10013,9001,23717,100(1,369)1,00015,000(1,115)1,11515,900(1,237)Ending inventory(1,000)Total12,90014,00014,88515,77816,968Gross profitAdministrative expenses1,0641,5061,7882,4431,930700763832907989Income before taxes3647439561,536941Income taxes (50%)182372478768471Net income182371478768470Retained earnings-beginning1,2061,3881,7592,2373,005Retained earnings–ending$ 1,388$ 1,759$ 2,237$ 3,005$ 3,475Earnings per share$1.82$3.71$4.78$7.68$4.70SCHEDULE OF INVENTORY BALANCES USING AVERAGE-COST METHODFOR THE YEARS ENDED MAY 31201220132014201520162017$1,010$1,124$1,101$1,270$1,500$1,720

Balance sheet is statement of assets and liabilities as on a particular date

Answered: UTRILLO INSTRUMENT COMPANY STATEMENT OF…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

(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

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions