View Policies Current Attempt in Progress The management of Larkspur Instrument Company had concluded with the concurrence of its independent auditors, that results of operations would be more fairly presented if Larkspur 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 $18,900 LARKSPUR INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 2016 2017 2018 2019 Sales-net $14,000 $15,390 $16,560 $18,290 Cost of goods sold Beginning inventory 1,000 1,090 1,010 1.130 Purchases 12,880 13,790 14,850 15,810 Ending inventory (1,090) (1,010) (1,130) (1,240) Total 12,790 13,870 14,730 15,700 Gross profit 1,210 1.520 1,830 2,590 Administrative expenses 700 760 830 900 Income before taxes 510 760 1,000 1,690 Income taxes (50%) 255 380 500 845 Net income 255 380 500 845 Retained earnings-beginning 1,210 1,465 1,845 2,345 Retained earnings-ending $1,465 $1,845 $2,345 $3,190 Earnings per share $2.55 $3.80 $5.00 $8.45 1,240 17,165 (1,380) 17,025 1,875 980 895 448 447 3,190 $3,637 $4.47 SCHEDULE OF INVENTORY BALANCES USING AVERAGE-COST METHOD FOR THE YEARS ENDED MAY 31 2015 2016 2017 2018 2019 2020 $1,010 $1,110 $1,110 $1,280 $1,500 $1,730 Prepare comparative statements for the 5 years, assuming that Larkspur changed its method of inventory pricing to average-cost Indicate the effects on net income and earnings per share for the years involved. Larkspur 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 eg -15,000 or parentheses eg (15,000). Round all amounts except EPS to the nearest whole dollar, eg 5,275. Round Earnings Per Share to 2 decimal places, eg 1.62. Round up the tax effects to the next whole dollar.) Prepare comparative statements for the 5 years, assuming that Larkspur changed its method of inventory pricing to average-cost Indicate the effects on net income and earnings per share for the years involved. Larkspur 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 eg -15,000 or parentheseseg (15,000). Round all amounts except EPS to the nearest whole dollar, eg 5,275. Round Earnings Per Share to 2 decimal places, eg 1.62. Round up the tax effects to the next whole dollar.) LARKSPUR INSTRUMENT COMPANY Statement of Income and Retained Earnings For the Years Ended May 31 2017 2018 2016 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 $ $ $ Prepare comparative statements for the 5 years, assuming that Larkspur changed its method of inventory pricing to average-cost Indicate the effects on net income and earnings per share for the years involved. Larkspur 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 eg -15,000 or parentheses eg (15,000). Round all amounts except EPS to the nearest whole dollar, eg 5,275. Round Earnings Per Share to 2 decimal places, eg 162. Round up the tax effects to the next whole dollar.) LARKSPUR INSTRUMENT COMPANY Statement of Income and Retained Earnings For the Years Ended May 31 2017 2018 2019 2020 $ $ $ $ $ $ $ $ $ $ $ $
