Exercise 22-3 Teal Co. decides at the beginning of 2017 to adopt the FIFO method of inventory valuation. Teal had used the LIFO method for financial reporting since its inception on January 1, 2015, and had maintained records adequate to apply the FIFO method retrospectively. Teal 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.

Inventory Determined by

Cost of Goods Sold Determined by Date

LIFO Method

FIFO Method

LIFO Method

FIFO Method January 1, 2015

$ 0

$ 0

$ 0

$ 0 December 31, 2015

100

8

800

892 December 31, 2016

200

220

940

828 December 31, 2017

350

410

1,100

1,060

Retained earnings reported under LIFO are as follows.

Retained Earnings Balance December 31, 2015

$1,060

December 31, 2016

1,980

December 31, 2017

2,740

Other information:

1.

For each year presented, sales are $2,900 and operating expenses are $1,040. 2.

Teal provides two years of financial statements. Earnings per share information is not required.

Prepare income statements under LIFO for 2015, 2016, and 2017.

TEAL CO. Income Statement For the Year Ended December 31 LIFO

2015

2016

2017

$

$

$

$

$

$

Prepare income statements under FIFO for 2015, 2016, and 2017.

TEAL CO. Income Statement For the Year Ended December 31 FIFO

2015

2016

2017

$

$

$

$

$

$

Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method for 2017 and 2016.

TEAL CO. Income Statement For the Year Ended December 31

2016

2017

$

$

$

$

Prepare comparative retained earnings statements for 2016 and 2017 under FIFO.

2016

2017

$

$

:

$

$

$

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