The management of Buffalo Instrument Company had concluded, with the concurrence of its independent auditors, that...
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The management of Buffalo Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if Buffalo 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. BUFFALO INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 2016 2017 2018 2019 2020 Sales-net $14,060 $15,510 $16,680 $18,380 $18,930 Cost of goods sold Beginning inventory 1,010 1,110 1,010 1,120 1,230 Purchases 13,050 13,960 14,890 16,000 17,620 Ending inventory (1,110) (1,010) (1,120) (1,230) (1,360) Total 12,950 14,060 14,780 15,890 17,490 Gross profit 1,110 1,450 1,900 2,490 1,440 Administrative expenses 700 770 840 910 1,000 Income before taxes 410 680 1,060 1,580 440 Income taxes (50%) 205 340 530 790 220 Net income 205 340 530 790 220 2016 2017 2018 2019 2020 Sales-net $14,060 $15,510 $16,680 $18,380 $18,930 Cost of goods sold Beginning inventory 1,010 1,110 1,010 1,120 1,230 Purchases 13,050 13,960 14,890 16,000 17,620 Ending inventory (1,110) (1,010) (1,120) (1,230) (1,360) Total 12,950 14,060 14,780 15,890 17,490 Gross profit 1,110 1,450 1,900 2,490 1,440 Administrative expenses 700 770 840 910 1,000 Income before taxes 410 680 1,060 1,580 440 Income taxes (50%) 205 340 530 790 220 Net income 205 340 530 790 220 Retained earnings-beginning 1,200 1,405 1,745 2,275 3,065 Retained earnings-ending $1,405 $1,745 $2,275 $3,065 $3,285 Earnings per share $2.05 $3.40 $5.30 $7.90 $2.20 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 2016 BUFFALO INSTRUMEN Statement of Income and R For the Years Ende 2017 Retained earnings-ending $ $ Earnings per share $ TRUMENT COMPANY ome and Retained Earnings ears Ended May 31 2018 $ 2019 2020 $ $ $ Prepare comparative statements for the 5 years, assuming that Buffalo changed its method of inventory pricing to average-cost. Indicate the effects on net income and earnings per share for the years involved. Buffalo 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) The management of Buffalo Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if Buffalo 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. BUFFALO INSTRUMENT COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED MAY 31 2016 2017 2018 2019 2020 Sales-net $14,060 $15,510 $16,680 $18,380 $18,930 Cost of goods sold Beginning inventory 1,010 1,110 1,010 1,120 1,230 Purchases 13,050 13,960 14,890 16,000 17,620 Ending inventory (1,110) (1,010) (1,120) (1,230) (1,360) Total 12,950 14,060 14,780 15,890 17,490 Gross profit 1,110 1,450 1,900 2,490 1,440 Administrative expenses 700 770 840 910 1,000 Income before taxes 410 680 1,060 1,580 440 Income taxes (50%) 205 340 530 790 220 Net income 205 340 530 790 220 2016 2017 2018 2019 2020 Sales-net $14,060 $15,510 $16,680 $18,380 $18,930 Cost of goods sold Beginning inventory 1,010 1,110 1,010 1,120 1,230 Purchases 13,050 13,960 14,890 16,000 17,620 Ending inventory (1,110) (1,010) (1,120) (1,230) (1,360) Total 12,950 14,060 14,780 15,890 17,490 Gross profit 1,110 1,450 1,900 2,490 1,440 Administrative expenses 700 770 840 910 1,000 Income before taxes 410 680 1,060 1,580 440 Income taxes (50%) 205 340 530 790 220 Net income 205 340 530 790 220 Retained earnings-beginning 1,200 1,405 1,745 2,275 3,065 Retained earnings-ending $1,405 $1,745 $2,275 $3,065 $3,285 Earnings per share $2.05 $3.40 $5.30 $7.90 $2.20 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 2016 BUFFALO INSTRUMEN Statement of Income and R For the Years Ende 2017 Retained earnings-ending $ $ Earnings per share $ TRUMENT COMPANY ome and Retained Earnings ears Ended May 31 2018 $ 2019 2020 $ $ $ Prepare comparative statements for the 5 years, assuming that Buffalo changed its method of inventory pricing to average-cost. Indicate the effects on net income and earnings per share for the years involved. Buffalo 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)
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Related Book For
Intermediate Accounting
ISBN: 978-1118742976
16th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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