• Ramirez Co. decides at the beginning of 2022 to adopt the FIFO method of inventory valuation. Ramirez has used the average-cost method for financial reporting since its inception on January 1, 2020, and has maintained records adequate to apply the FIFO method retrospectively. Ramirez concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the statement of financial position. The following table presents the effects of the change in accounting policy on inventory and cost of goods sold.