Exercise 22-3

Taveras Co. decides at the beginning of 2014 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2012, and had maintained records adequate to apply the FIFO method retrospectively. Taveras concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the balance sheet. The table presents the effects of the change in accounting principle on inventory and cost of goods sold.

		Inventory Determined by				Cost of Goods Sold Determined by
Date		LIFO Method		FIFO Method		LIFO Method		FIFO Method
January 1, 2012		$ 0		$ 0		$ 0		$ 0
December 31, 2012		104		80		787		811
December 31, 2013		206		241		1,003		944
December 31, 2014		322		397		1,132		1,092

Retained earnings reported under LIFO are as follows.

		Retained Earnings Balance
December 31, 2012		$2,553
December 31, 2013		4,890
December 31, 2014		7,098

Other information:

1.		For each year presented, sales are $4,371 and operating expenses are $1,031.
2.		Taveras provides two years of financial statements. Earnings per share information is not required.

A)Prepare income statements under LIFO for 2012, 2013, and 2014.

B) Prepare income statements under FIFO for 2012, 2013, and 2014.

C) Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method for 2014 and 2013.

D) Prepare comparative retained earnings statements for 2013 and 2014 under FIFO.