Neville Company decides at the beginning of 2014 to adopt the FIFO method of inventory valuation. It had used the LIFO method for financial and tax reporting since its inception on January 1, 2012, and had maintained records that are sufficient to retrospectively apply the FIFO method. Neville concluded that the FIFO method is the preferable inventory valuation method for its inventory (it was the lone member of its industry that used LIFO; its competitors all valued inventory using FIFO).
The effects of the change in accounting principle on inventory and cost of sales are presented in the following table:

For each year presented, assume that sales are $6,000 and selling, general, and administrative expenses are $1,800. Neville Company€™s effective income tax rate for all years is 35% (there are no permanent or temporary differences under FASB ASC Section 740€”Income Taxes prior to the change). Neville€™s annual report provides two years of financial results. The company€™s income statements as originally reported under the LIFO method follow.

Required:
1. Prepare Neville Company€™s 2014 and 2013 income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method.
2. Prepare Neville Company€™s disclosure related to the accounting change; limit disclosure of financial statement line items affected by the change in accounting principle to those appearing on the company€™s income statements for the yearspresented.

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Inventory Determined By Cost of Sales Determined By Date LIFO Method FIFO Method LIFO Method FIFO Method 1/1/2012 12/31/2012 12/31/2013 12/31/2014 200 400 640 160 480 780 1,600 2,000 2,260 1,640 1,880 2,200 2013 Income Statements Sales Cost of goods sold Income before income taxes Income taxes 2012 $6,000 2,000 $6,000 1,600 Selling, general, & administrative expenses 1,001,800 2,600 910 $1,690 2,200 770 $1,430 Net income