Problem 22-01 The management of Kingbird Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if kingbird changed its method of pricing inventory from last-in, first-out (LIFO) to average-cost in 2020. 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. 2020 $19,060 KINGBIRD INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 2016 2017 2018 2019 Sales-net $14,030 $15,660 $16,650 $18,070 Cost of goods sold Beginning inventory 990 1,110 990 1,130 Purchases 13,040 14,020 14,960 15,840 Ending inventory (1,110) (990) (1,130) (1,230) Total 12,920 14,140 14,820 15,740 Gross profit 1,110 1,520 1,830 2,330 Administrative expenses 710 760 830 910 Income before taxes 400 760 1,000 1,420 Income taxes (50%) 380 710 Net income 200 380 500 710 Retained earnings-beginning 1,210 1 ,410 1,790 Retained earnings-ending $1,410 $1,790 $2,290 $3,000 Earnings per share $2.00 $3.80 $5.00 $7.10 1,230 15,793 (1,360) 15,663 3,397 990 2,407 1,204 1,203 3,000 $4,203 $12.03 200 500 SCHEDULE OF INVENTORY BALANCES USING AVERAGE-COST METHOD FOR THE YEARS ENDED MAY 31 2015 2016 2017 2019 2020 $1,000 $1,140 $1,090 $1,290 $1,490 $1,700 Prepare comparative statements for the 5 years, assuming that Kingbird changed its method of inventory pricing to average-cost. Indicate the effects on net income and earnings per share for the years involved. Kingbird Instruments started business in 2015. Assume that the number of shares outsanding is 100. (Enter amounts that decrease cost of goods sold using either a negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000). Round all amounts except EPS to the nearest whole dollar, e.g. 5,275. Round Earnings Per Share to 2 decimal places, e.g. 1.62. Round up the tax effects to the next whole dollar.) KINGBIRD INSTRUMENT COMPANY Statement of Income and Retained Earnings For the Years Ended May 31 2017 2018 2016 2019 2020 - e Sales-net Cost of goods sold Beginning inventory Purchases Ending inventory Total Gross profit Administrative expenses Income before taxes Income taxes Net income Retained earnings-beginning: As originally reported Adjustment As restated Retained earnings-ending Earnings per share