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Change from FIFO to weighted average

BE4-6 During 2007 Lebron James Company changed from FIFO to weighted-average inventory pricing.
Pretax income in 2006 and 2005 (James'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 2006 and $170,000 in 2005. In 2007, Lebron James Company reported pretax income (using weighted average
pricing) of $190,000. Show comparative income statements for Lebron James Company, beginning
with "Income before income tax," as presented on the 2007 income statement. (The tax rate in all
years is 30%.)

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Solution Summary

The solution explains the impact on the income statement of a change from FIFO to weighted average method