Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cambi Company began operations on January 1, 2014. In the second quarter of 2015, it adopted the FIFO method of inventory valuation. In the past,

Cambi Company began operations on January 1, 2014. In the second quarter of 2015, it adopted the FIFO method of inventory valuation. In the past, it used the LIFO method. The companys interim income statements as originally reported under the LIFO method follow:

2014

2015

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:

2014

2015

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 2015 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.

Calculate the net income and earnings per share that Cambi reports for the three-month period and the six-month period ended June 30, 2015. (Round "Earnings per share" answers to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting International Financial Reporting Standards Global Edition

Authors: Charles T. Horngren, C. William Thomas, Wendy M. Tietz, Themin Suwardy, Walter T. Harrison

11th Edition

9781292211145

More Books

Students also viewed these Accounting questions