Iris Company decided to change from LIFO to FIFO inventory costing, effective January 1, 2012. The following data were available: Excess of FIFO

Iris Company decided to change from LIFO to FIFO inventory costing, effective January 1, 2012. The following data were available:

Excess of FIFO

Ending Inventory

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 questions relating to the 2011-2012 comparative financial statements.

Be sure to show your work.

1. What is the net income for 2012?

2. What is restated net income for 2011?

3. Prepare the 2011 Statement of Retained Earning as it would appear in the comparative 2011- 2012 financial statements.

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