Hello,

Please see attachment for problem on changing to FIFO from LIFO

X industries has used the LIFO inventory since it started business 10 years ago. It has decided that it would comply with the IFRS standard and would switch to the FIFO method effective January 1, 2014 for the 2015 financial year. International uses a periodic inventory system. Records are not available such that years prior to 2013 can be restated. That means that the difference in the January 1, 2014 inventory is an adjustment to January 1, 2014 retained earnings (net of tax) The tax rate for all periods is 40% X uses a periodic inventory method Here are the end products needed; 1. 2. 3. 4. Restated income statement and retained earnings statement for 2014 Income and retained earnings earning statement for 2015, using FIFO Entries to adjust inventory, retained earnings and taxes as of January 1, 2015 Journal entries to close purchases and adjust inventories and to create a cost of goods sold for 20145 If it's suggested you create cost of goods T-accounts for 2014 under both LIFO and FIFO to calculate the number for 2014 For 2015 you really only need a cost of goods sold using the FIFO method since the change will be effective for 2014 These are the inventory values on January 1, 2014 LIFO FIFO 300 @ 20 6,000 500 @ 25 200 @ 23 4,600 Transaction for 2014; Purchases 800 @ 30 24,000 700 @ 32 22,400 Sold 1200 @ 60 72,000 Transactions for 2015 Purchases 1,000 @ 34 34,000 1,200 @ 36 43,200 Sold 1,800 @ 79 142,200 13,000 Income statement (2015 has not been issued it is tentative) 2014 Sales Cost of goods sold Gross profit S&A expenses Income before tax Tax provision Net income 2015 72,000 sales 37,400 cost of goods sold 34,600 gross profit 19,000 S&A expenses 15,600 income before tax -6240 tax provision 9360 net income 142,200 63,600 78,600 33,600 45,000 -18,000 27,000 Retained earnings Balance 1/1/14 Net income Balance 12/31/14 130,000 balance 1/1/15 9360 net income 139,360 balance 12/31/15 139,360 27,000 166,360