Riverbed Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Riverbed had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Riverbed 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. Income taxes are ignored. 
Exercise 22-03 (Part Level Submission) Riverbed Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Riverbed had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Riverbed 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. Income taxes are ignored. Inventory Determined cost of Goods Sold Determined by by LIFO Method Date January 1, 2018 December 31, 2018 December 31, 2019 December 31, 2020 LIFO Method $ 0 90 220 FIFO Method $ 0 7 240 400 $ 0 750 FIFO Method $ 0 833 947 1,040 320 1,050 1,100 Retained earnings reported under LIFO are as follows. December 31, 2018 December 31, 2019 December 31, 2020 Retained Earnings Balance $1,140 1,980 2,770 Other information: 1. 2. For each year presented, sales are $2,960 and operating expenses are $1,070. Riverbed provides two years of financial statements. Earnings per share information is not required. Your answer is correct. Prepare income statements under LIFO for 2018, 2019, and 2020. RIVERBED CO. Income Statement For the Year Ended December 31 LIFO 2018 2019 2020 2960 2960 T Sales Cast of Goods Sold 2 TOperating Expenses 1100 1070 1070 T Net Income / (Loss) 840 790 Prepare income statements under FIFO for 2018, 2019, and 2020. RIVERBED CO. Income Statement For the Year Ended December 31 FIFO 2018 2019 2020 T Sales 2960 2960 2960 1 Cost of Goods Sold T Operating Expenses 1040 1070 1070 T Net Income / (Loss) 1057 850 Click if you would like to Show Work for this question: Open Show Work (b) Your answer is correct. Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method for 2020 and 2019. RIVERBED CO. Income Statement For the Year Ended December 31 2019 2020 Sales 2960 2960 Cost of Goods Sold A 947 1040 T Operating Expenses A 1070 1070 850 T Net Income / (Loss) 943 Click if you would like to Show Work for this question: Open Show Work (d) Your answer is partially correct. Try again. Prepare comparative retained earnings statements for 2019 and 2020 under FIFO. 2019 2020 Retained Earnings, January 1, as reported 1140 7 | Adjustment for Cumulative Effect of Applying New Acounting Method T Retained Earnings, January 1, as adjusted 1057 T Net Income / (Loss) 943 850 Retained Earnings, December 31 2000 850 Click if you would like to Show Work for this question: Open Show Work
