Sumner Stores began operations on January 1, 2018, and adopted the average-cost method of accounting. In 2021, it is considering a change to the FIFO basis. Sumner provided the following information to assist in deciding whether to change inventory valuation techniques.

Sumner Stores reported the following income statement information:

Required

a. Prepare the income statements under both methods for the years ended December 31, 2018, through December 31, 2020.

b. Assume that Sumner Stores changes to the FIFO basis effective January 1, 2021. Prepare the comparative income statements for the 3 years ended December 31, 2021.

c. Prepare the retained earnings column of the statement of stockholders’ equity for the year ended December 31, 2021, assuming that Sumner does not present comparative statements. Sumner does not declare dividends in 2018–2021.

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Year Ended 12/31/2018 12/31/2019 12/31/2020 12/31/2021 Ending Inventory Average Cost $10,000 16,000 24,000 32,000 FIFO $12,000 19,500 28,000 35,600 Cost of Sales Average Cost $76,000 82,000 95,000 108,000 FIFO $74,000 78,500 91,000 90,000 Retained Earnings Average Cost $23,400 48,300 72,300 95,100 FIFO $24,600 51,600 78,000 111,600