Iris Company decided to change from LIFO to FIFO inventory costing, effective January 1, 2012. The following data were available:
Excess of FIFO
Pretax Operating over LIFO
Year Income using LIFO Ending Inventory
2012 $40,000 $8,000
2011 20,000 7,000
2010 30,000 4,000
The income tax rate is 40%. The company began operations on January 1, 2010, and has paid no dividends since inception.
Answer the following problems relating to the 2011-2012 comparative financial statements.
Be sure to show your work. 15 points
a. What is net income for 2012?
b. What is restated net income for 2011?
c. Prepare the 2011 statement of retained earnings as it would appear in the comparative 2011-2012 financial statements.