Refer to RE22- 2. Assume Heller Company had sales revenue of $ 510,000 in 2016 and $ 650,000 in 2017. Prepare Heller’s partial income statements (through gross profit) for 2016 and 2017.
In Re22-2
Heller Company began operations in 2016 and used the LIFO method to compute its $ 300,000 cost of goods sold for that year. At the beginning of 2017, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been $ 250,000 in 2016. For 2017, Heller’s cost of goods sold under FIFO was $ 360,000, while it would have been $ 410,000 under LIFO. Heller is subject to a 30% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior year’s income (net of taxes) that Heller would report on its retained earnings statement for 2017.