Exercise 22-03 Ayayai Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Ayayai had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Ayayai concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold. Income taxes are ignored. | | Inventory Determined by | | Cost of Goods Sold Determined by | Date | | LIFO Method | | FIFO Method | | LIFO Method | | FIFO Method | January 1, 2018 | | $ 0 | | $ 0 | | $ 0 | | $ 0 | December 31, 2018 | | 90 | | 8 | | 750 | | 832 | December 31, 2019 | | 190 | | 250 | | 1,030 | | 888 | December 31, 2020 | | 290 | | 380 | | 1,070 | | 1,040 | Retained earnings reported under LIFO are as follows. | | Retained Earnings Balance | December 31, 2018 | | $950 | | December 31, 2019 | | 1,620 | | December 31, 2020 | | 2,250 | | Other information: 1. | | For each year presented, sales are $2,750 and operating expenses are $1,050. | 2. | | Ayayai provides two years of financial statements. Earnings per share information is not required. | Prepare income statements under LIFO for 2018, 2019, and 2020. Prepare income statements under FIFO for 2018, 2019, and 2020. Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method for 2020 and 2019. Prepare comparative retained earnings statements for 2019 and 2020 under FIFO. |