Question

During 2017, Williamson Company changed from FIFO to weighted-average inventory pricing. Pretax income in 2016 and 2015 (Williamson’s first year of operations) under FIFO was $160,000 and $180,000, respectively. Pretax income using weighted-average pricing in the prior years would have been $145,000 in 2016 and $170,000 in 2015. In 2017, Williamson reported pretax income (using weighted-average pricing) of $180,000. Show comparative income statements for Williamson, beginning with "Income before income tax," as presented on the 2017 income statement. (The tax rate in all years is 30%.)

Answer 1

Step-by-step explanation:

Comparative income statements for Williamson is presented below:

Particulars 2017 2016 2015

Income before income tax $180,000 $145,000 $170,000

Less:Income tax $54,000 $43,500 $51,000

Net income $126,000 $101,500 $119,000

The income tax is computed below:

For 2017

= $180,000 × 30%

= $54,000

For 2016

= $145,000 × 30%

= $43,500

For 2015

= $170,000 × 30%

= $51,000