Cambi Company began operations on January 1, 2016. In the second quarter of 2017

Question

Cambi Company began operations on January 1, 2016. In the second quarter of 2017, it adopted the FIFO method of inventory valuation. In the past, it used the LIFO method. The company's interim income statements as originally reported under the LIFO method follow 2017 sta 2016 1stg 2ndQ 3rdQ 4the $ 31, 000 6,100 4,100 S 20, 800 8,320 $12,480 $33,000 7,100 4,300 $ 21,600 8,640 $12, 960 35,000 37,00039,000 Sales costf goods sold (LIFO) Operating expenses Income before income taxes Income taxes (40%) 7,900 4,700 9,100 ,100 10,600 5,300 $ 22,400 22,800 23,100 8,960 9,120 9,240 Net income $13,440 $13, 680 $13, 860 If the FIFO method had been used since the company began operations, cost of goods sold in each of the previous quarters would have been as follows: 2016 1sta $5,900 2ndQ S6,700 3rdg $7,300 4the $8,100 2017 1ste $9,500 Cost of goods sold (FIFO) Sales for the second quarter of 2017 are $41,000, cost of goods sold under the FIFO method is $11,100, and operating expenses are $5,500. The effective tax rate remains 40 percent. Cambi Company has 1,000 shares of common stock outstanding Prepare a schedule showing the calculation of net income and earnings per share that Cambi reports for the three-month period and the six-month period ended June 30, 2017. (Round "Earnings per share" answers to 2 decimal places.) hree Months Ended June 30 Six Months Ended June 30 2016 2017 2016 2017 Net income Net income per common share

Explanation / Answer

Calculation of net income and net income per share(three months ended June 30) Particulars Amount(2016) Amount(2017) Sales 33000 41000 Less: Cost of Goods sold 6700 11100 Less: Operating expenses 4300 5500 Income before Income taxes 22000 24400 Income taxes(40%) 8800 9760 Net Income 13200 14640 Number of shares 1000 1000 Net Income per common share 13.2 14.64 Calculation of net income and net income per share(six months ended June 30) Particulars Amount(2016) Amount(2017) Sales 64000 80000 Less: Cost of Goods sold 12600 20600 Less: Operating expenses 8400 10800 Income before Income taxes 43000 48600 Income taxes(40%) 17200 19440 Net Income 25800 29160 Number of shares 1000 1000 Net Income per common share 25.8 29.16

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