unit 7 part 1

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.

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