Change in Accounting Principle without Detailed Prior Year Information
Refer to Exercise 20 29. Assume that the detailed information for 2006 and 2007 is not available. During 2008, dividends of $17,500 were paid (compared to dividends of $15,000 in both 2006 and 2007). Based on this information, prepare the retained earnings statement for 2008.
Exercise 20 29
Change in Accounting Principle
Kamila Stores decided to change from LIFO to FIFO as of January 1, 2008. The change is being made for both book and tax purposes.
|
|
Net Income |
Excess of LIFO Cost of |
|
|
|
Computed |
Goods Sold over |
Income Effect |
|
Year |
Using LIFO |
FIFO Cost of Goods Sold |
(Net of Tax) |
|
Prior to 2006 |
|
$12,500 |
$ 7,500 |
|
2006 |
$62,500 |
6,250 |
3,750 |
|
2007 |
54,500 |
7,500 |
4,500 |
|
2008 |
78,000 |
11,250 |
6,750 |
|
|
|
$37,500 |
$22,500 |
1. Using LIFO, the beginning retained earnings as of January 1, 2006, was $173,000.
Compute adjusted beginning retained earnings, using FIFO, as of January 1, 2006.
2. The 3 year comparative income statement for 2008 includes net income for 2006, 2007, and 2008. In that comparative income statement, prepared after the change for FIFO has been adopted, what amount of net income will be reported for each year?