Question & Answer: Exercise 22-5 Presented below are income statements prepared on an average-cost and FIFO basis for Carlton Company, whic…..

Exercise 22-5 Presented below are income statements prepared on an average-cost and FIFO basis for Carlton Company, which started operations on January 1, 2014. The company presently uses the average-cost method of pricing its inventory and has decided to switch to the FIFO method in 2015. The FIFO income statement is computed in accordance with IFRS. Carlton’s profit-sharing agreement with its employees indicates that the company will pay employees 5% of income before profit sharing. Income taxes are ignored Average-Cost Basis FIFO Basis 2015 2014 Sales Cost of goods sold Operating expenses Income before profit sharing Profit-sharing expense Net income 2015 2014 3,000 3,000 3,000 3,000 940 1,000 1,000 900 1,060 53 855 1,007 1,000 1,100 1,130 1,000 870 1,000 50 950 45 826 Answer the following questions If comparative income statements are prepared, what net income should Carlton report in 2014 and 2015? 2015 2014 Net income e