Kyto Electronics decides to adopt the average cost method of inventory valuation at the beginning of 20 . Kyto had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the average-cost method retrospectively. Kyto concluded that average-cost is the preferable inventory method because extreme effects of FIFO or LIFO on the income statement and balance sheet are averaged. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold for each year:

Other information: 1. For each year presented, sales are $15,000 and operating expenses are $2,500. 2. Kyto provides 2 years of financial statements, and earnings per share information is not required. 3. Ignore income taxes. Instructions (a) Prepare income statements under LIFO and average-cost for 20 , 20 , and 20 . (b) Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the average-cost method for 20 and 201 . (c) Prepare comparative retained earnings statements for 20 and 201 under the average-cost method. Retained earnings reported under LIFO are as follows:

Inventory Determined by LIRO Average Cast $2,000 $3,000 2018 Cost of Goods Sold Determined by LIRO Average Cast $10,000 10,500 9. 11,000 10.000 2020 3.500 6,000 Inventory Determined by LIRO Average Cast $2,000 $3,000 2018 Cost of Goods Sold Determined by LIRO Average Cast $10,000 10,500 9. 11,000 10.000 2020 3.500 6,000