E22-5 (L01) (Accounting Change) Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2016. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2017. The FIFO income statement is computed in accordance with the require- ments of GAAP. Kenseth's profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored. LIFO Basis 2017 2016 $3,000 $3,000 1,130 1,000 1,000 870 1,000 Sales Cost of goods sold Operating expenses Income before profit-sharing Profit-sharing expense Net income 1,000 FIFO Basis 2017 2016 $3,000 $3,000 1,100 940 1,000 1,000 900 1,060 100 100 $ 783 900 $ 804 $ 960 Instructions Answer the following questions. (a) If comparative income statements are prepared, what net income should Kenseth report in 2016 and 2017? (b) Explain why, under the FIFO basis, Kenseth reports $100 in 2016 and $96 in 2017 for its profit-sharing expense. (c) Assume that Kenseth has a beginning balance of retained earnings at January 1, 2017, of $900 using the LIFO method. The company declared and paid dividends of $500 in 2017. Prepare the-retained earnings statement for 2017, assuming that Kenseth has switched to the FIFO method