Raven Limited has traditionally valued its inventory using the weighted average method of valuation (see Chapter 11, Section 11.2). During the year ended 31 December 2017, the directors of Raven Limited decided to change the method of inventory valuation to the First In First Out (FIFO) method in order to give a fairer presentation of the company’s results and financial position.

The reported retained earnings of Raven Limited at 31 December 2015 were €2,500,000 and extracts from the company’s financial statements for each of the last three years, on the basis of inventory being valued on a weighted average basis, are provided below.

Requirement Based on the information provided above, show how the change in inventory valuation method will be reflected in the financial statements of Raven Limited for the year ended 31 December 2017.

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2015 2016 2017 Cost of sales 830,000 904,000 968,000 Profit after tax 50,000 80,000 105,000 Inventory valuation: Weighted average basis 275,000 257,000 304,000 FIFO basis 296,000 294,000 365,000