1 answer

Presented below are income statements prepared on a LIFO and FIFO basis for Headland Company, which...

Question:

Presented below are income statements prepared on a LIFO and FIFO basis for Headland 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. Headland’s profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored.

LIFO Basis

FIFO Basis

2017

2016

2017

2016

Sales $3,030 $3,030 $3,030 $3,030
Cost of goods sold 1,100 1,030 1,070 910
Operating expenses 1,040 1,040 1,040 1,040
Income before profit-sharing 890 960 920 1,080
Profit-sharing expense 89 96 104 96
Net income $801 $864 $816 $984

Answer the following questions.

Collapse question part

(a)

If comparative income statements are prepared, what net income should Headland report in 2016 and 2017? (Round answers to 0 decimal places, e.g. 125.)

2017

2016

Net income $

$


Answers

Headland Company
Income Statement
For the Year Ended
2017 2016
Sales $3,030 $3,030
Cost of Goods Sold $1,070 $910
Operating expenses $1,040 $1,040
Income before profit-sharing $920 $1,080
Profist-Sharing expenses $104 $96
Net Income $816 $984
.

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