Exercise 22-5 (Part Level Submission)

Presented below are income statements prepared on a LIFO and FIFO basis for Culver 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 requirements of GAAP. Culvers 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				FIFO Basis
		2017		2016		2017		2016
Sales		$3,010		$3,010		$3,010		$3,010
Cost of goods sold		1,190		1,040		1,050		930
Operating expenses		1,050		1,050		1,050		1,050
Income before profit-sharing		770		920		910		1,030
Profit-sharing expense		77		92		102		92
Net income		$693		$828		$808		$938

Answer the following questions.

(c) Your answer is partially correct. Try again Assume that Culver has a beginning balance of retained earnings at January 1, 2017, of $828 using the LIFO method. The company declared and paid dividends of $480 in 2017. Prepare the retained earnings statement for 2017, assuming that Culver has switched to the FIFO method (Round answers to 0 decimal places, e.g. 125.) CULVER COMPANY Retained Earnings Statement Retained Earnings, January 1, as reported 828 Cumulative Effect of Change to FIFo 120 Retained Earnings, January 1, as adjusted 948 Add 808 Less Dividends 500 1256 Retained Earnings, December 31