Chapter 22, Problem 5E

To determine

Retained earnings: Retained earnings mean the part of profits earned by the company instead of giving it as a dividend, the amount is retained by the company.

(a)

To compute: To compute the net incomes for the year 2016 and 2017.

Given information:

Particulars	Under LIFO method		Under FIFO method
	2017	2016	2017	2016
Sales	3,000	3,000	3,000	3,000
Cost of goods sold	1,130	1,000	1,100	940
Operating expenses	1,000	1,000	1,000	1,000
Income before profit sharing expense	870	1,000	900	1,060
Profit sharing expenses	87	100	96	100
Net income after profit sharing expense	783	900	804	960

To determine

(b)

To determine the profit sharing expenses under FIFO method.

To determine

(c)

To prepare: To prepare retained earnings statement for the year 2017.

Given information: Opening balance of retained earnings as on January 1,2017 is $8,000.

Dividend is $500.