The management of Utrillo Instrument Ltd. 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 FIFO to average-cost in 2022. Given below is the 5-year summary of income under FIFO and a schedule of what the inventories would be if recorded according to the average-cost method (amounts in millions, except earnings per share).

Instructions

Prepare comparative statements for the 5 years, assuming that Utrillo changed its method of inventory costing to average-cost. Indicate the effects on net income and earnings per share for the years involved. Utrillo Instruments started business in 2017. All amounts except EPS are rounded up to the nearest yen.

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Utrillo Instrument Ltd. Statement of Income and Retained Earnings For the Years Ended May 31 2018 2019 2020 2021 2022 Sales-net ¥13,964 ¥15,506 ¥16,673 ¥18,221 ¥18,898 Cost of goods sold Beginning inventory 1,000 1,100 1,000 1,115 1,237 Purchases 13,000 13,900 15,000 15,900 17,100 Ending inventory (1,100) (1,000) (1,115) (1,237) (1,369) Total 12,900 14,000 14,885 15,778 16,968 Gross profit 1,064 1,506 1,788 2,443 1,930 Administrative expenses 700 763 832 907 989 364 956 478 Income before taxes 743 1,536 941 Income taxes (50%) 182 372 768 471 Net income 182 371 478 768 470 Retained earnings-beginning Retained earnings-ending 1,206 1,388 1,759 2,237 3,005 ¥ 1,388 ¥ 1,759 ¥ 2,237 ¥ 3,005 ¥3,475 ¥3.71 ¥4.78 ¥7.68 Earnings per share ¥1.82 ¥4.70 Schedule of Inventory Balances Using Average-Cost Method For the Year Ended May 31 2017 2018 2019 2020 2021 2022 ¥1,010 ¥1,124 ¥1,101 ¥1,270 ¥1,500 ¥1,720