Question
The management of Waterway Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if
The management of Waterway Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if Waterway 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.
WATERWAY INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||
Salesnet | $14,060 | $15,510 | $16,670 | $18,410 | $18,710 | ||||||||||
Cost of goods sold | |||||||||||||||
Beginning inventory | 990 | 1,100 | 1,000 | 1,110 | 1,230 | ||||||||||
Purchases | 12,950 | 13,930 | 15,020 | 15,790 | 17,428 | ||||||||||
Ending inventory | (1,100) | (1,000) | (1,110) | (1,230) | (1,380) | ||||||||||
Total | 12,840 | 14,030 | 14,910 | 15,670 | 17,278 | ||||||||||
Gross profit | 1,220 | 1,480 | 1,760 | 2,740 | 1,432 | ||||||||||
Administrative expenses | 700 | 760 | 830 | 910 | 990 | ||||||||||
Income before taxes | 520 | 720 | 930 | 1,830 | 442 | ||||||||||
Income taxes (50%) | 260 | 360 | 465 | 915 | 221 | ||||||||||
Net income | 260 | 360 | 465 | 915 | 221 | ||||||||||
Retained earningsbeginning | 1,200 | 1,460 | 1,820 | 2,285 | 3,200 | ||||||||||
Retained earningsending | $1,460 | $1,820 | $2,285 | $3,200 | $3,421 | ||||||||||
Earnings per share | $2.60 | $3.60 | $4.65 | $9.15 | $2.21 |
Please help as I am stuck on the last portion.
SCHEDULE OF INVENTORY BALANCES USING AVERAGE-COST METHOD FOR THE YEARS ENDED MAY 31 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||
$1,000 | $1,130 | $1,110 | $1,270 | $1,490 | $1,720 |
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