Change in Principle?Inventory?Periodic the management of Utrillo Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if Utrillo changed its method of pricing inventory from last-in, first-out (LIFO) to average cost in 2010. 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. Prepare comparative statements for the 5 years, assuming that Utrillo changed its method of inventory pricing to average cost. Indicate the effects on net income and earnings per share for the years involved. Utrillo Instruments started business in 2005. (All amounts except EPS are rounded up to the nearest dollar.)

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UTRILLO INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 2006 2008 2007 2009 2010 Sales-net Cost of goods sold Beginning inventory Purchases $15,506 $13.964 $16,673 $18,221 $18,898 1,000 15,000 1,000 1,100 1,115 1,237 13,000 13,900 15,900 17,100 Ending inventory (1,100) (1,000) (1,115) 14,885 (1,237) (1,369) 16,968 Total 12,900 14,000 15,778 1,930 989 Gross profit Administrative expenses 1,064 1,506 763 1,788 832 2,443 907 700 1,536 Income before taxes 364 743 956 941 Income taxes (50%) 182 372 478 768 471 Net income 182 1,206 371 478 768 470 2,237 Retained earnings-beginning 1,388 1,759 3,005 $ 1,759 $ 2,237 $ 3,005 $ 3,475 $ 1,388 Retained earnings-ending $1.82 $3.71 $4.78 $7.68 $4.70 Earnings per share SCHEDULE OF INVENTORY BALANCES USING AVERAGE COST METHOD FOR THE YEARS ENDED MAY 31 2005 2006 2007 2008 2009 2010 $1,010 $1,124 $1,101 $1,270 $1,500 $1,720