Iris Company Decided to Change from LIFO to FIFO Inventory

question 80

Essay

Iris Company decided to change from LIFO to FIFO inventory costing, effective January 1, 2012.The following data were available:
$\begin{array}{lrr}&& \text { Excess of FIFO}\\&& \text { Ending Inventory}\\& \text { Pretax Operating } & \text { Over LIFO } \\\text { Year } & \text { Income using LIFO } & \text { Ending Inventory }\\2012 & \$ 40,000 & \$ 8,000 \\2011 & 20,000 & 7,000 \\2010 & 30,000 & 4,000\end{array}$ The income tax rate is 40%.The company began operations on January 1, 2010, and has paid no dividends since inception.
Required:
Answer the following questions relating to the 2011-2012 comparative financial statements.
a. What is net income for 2012 ?
b. What is restated net income for 2011?
c. Prepare the 2011 statement of reteined earnings as it would appear in the comprative 2011-2012 financial statements

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Definitions:

Automatic Stabilizers

Financial policies and schemes intended to balance out variations in a country's economic performance, avoiding extra government or policymaker involvement.

Legislative Action

The process by which laws are created, amended, or repealed within a legislative body such as a parliament or congress.

Macroeconomic Activity

The total economic activities and interactions at a national or global level, including production, consumption, saving, and investment.

Nondiscretionary Fiscal Policy

Government policies related to taxation and spending that automatically adjust without the need for explicit action by policy makers.