Ramirez Co. decides at the beginning of 2019 to adopt the FIFO method of inventory valuation. Ramirez had used the average-cost method for financial reporting since its inception on January 1, 2017, and had maintained records adequate to apply the FIFO method retrospectively. Ramirez concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the statement of financial position. The following table presents the effects of the change in accounting policy on inventory and cost of goods sold.

Retained earnings reported under average-cost are as follows.
Retained Earnings Balance
December 31, 2017..............................$2,200
December 31, 2018................................4,200
December 31, 2019................................6,070
Other information:
1. For each year presented, sales are $4,000 and operating expenses are $1,000.
2. Ramirez provides two years of financial statements. Earnings per share information is not required.
Instructions
a. Prepare income statements under average-cost and FIFO for 2017, 2018, and 2019.
b. Prepare income statements reflecting the retrospective application of the accounting change from the average-cost method to the FIFO method for 2019 and 2018.
c. Prepare the note to the financial statements describing the change in method of inventory valuation. In the note, indicate the income statement line items for 2019 and 2018 that were affected by the change in accounting policy.
d. Prepare comparative retained earnings statements for 2018 and 2019 under FIFO.

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Inventory Determined by Cost of Goods Sold Determined by FIFO Method Date Average-Cost Method FIFO Method Average-Cost Method January 1, 2017 80 December 31, 100 800 820 2017 December 31, 240 1,000 940 200 2018 December 31, 2019 320 1,130 1,100 390