Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. exercise 22-5 presented below are income statement

Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for...

60.1K

Verified Solution

Question

Accounting

Exercise 22-5 Presented below are income statements prepared on a LIFO and FIFO basis for Splish Company, which started operations on January 1, 2016. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2017. The FIFO income statement is computed in accordance with the requirements of GAAP. Splishs profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored.

If comparative income statements are prepared, what net income should Splish report in 2016 and 2017?

Net Income 2017

Net Income 2016

LIFO BASIS LIFO BASIS FIFO BASIS FIFO BASIS
2017 2016 2017 2016
SALES $3,010 $3,010 $3,010 $3,010
COST OF GOODS $1,190 $1,040 $1,050 $930
OPERATING EXPENSES $1,050 $1,050 $1,050 $1,050
Income before profit sharing $770 $920 $910 $1,030
Profit sharing Expense $77 $92 $102 $92
Net Income 693 828 808 938

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students