Solved by verified expert :Ramirez Co. decides at the beginning of 2012 to adopt the FIFO
method of inventory valuation. Ramirez had used the LIFO method for financial
reporting since its inception on January 1, 2010, and had 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 balance sheet. The table presents the effects of the change in
accounting principle 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, 2010
$ 0
$ 0
$ 0
$ 0
December 31, 2010
110
70
796
836
December 31, 2011
209
249
1,009
929
December 31, 2012
320
409
1,132
1,083
Retained earnings reported under LIFO are as follows.
Retained Earnings Balance
December 31, 2010
$2,421
December 31, 2011
4,629
December 31, 2012
6,714
Other information:
1.
For each year presented, sales are $4,279 and operating
expenses are $1,062.
2.
Ramirez provides two years of financial statements. Earnings per
share information is not required.
