Armstrong Limited has used the average cost (AC) method to determine inventory values since first formed in \(20 X 3\). In \(20 X 7\), the company decided to switch to the FIFO method, to conform to industry practice. Armstrong will still use average cost for tax purposes. The tax rate is \(30 \%\). The following data has been assembled:

Required:
Present the comparative retained earnings statement for \(20 X 7\), giving effect to the change in accounting policy.

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20X3 20X4 20X5 20X6 20X7 Net income, as reported, after tax $56,000* $65,000* $216,000* $255,000* $125,000** Closing inventory, AC 35,000 45,000 56,000 91,000 116,000 Closing inventory, FIFO 41,000 57,000 52,000 84,000 130.000 Dividends 5,000 7,000 7,000 10,000 14,000 *Using the old policy, average cost **Using the new policy, FIFO.