Accounting: Exercise 22-3 - Taveras Co. decides at the beginning of 2014...

Exercise 22-3

Taveras Co. decides at the beginning of 2014 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2012, and had maintained records adequate to apply the FIFO method retrospectively. Taveras 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, 2012	$ 0	$ 0	$ 0	$ 0
December 31, 2012	102	84	783	801
December 31, 2013	202	242	1,004	946
December 31, 2014	330	404	1,136	1,102

Retained earnings reported under LIFO are as follows.

		Retained Earnings Balance
December 31, 2012		$2,609
December 31, 2013		4,997
December 31, 2014		7,253

Other information:

1.		For each year presented, sales are $4,394 and operating expenses are $1,002.
2.		Taveras provides two years of financial statements. Earnings per share information is not required.

Prepare income statements under LIFO for 2012, 2013, and 2014.

TAVERAS CO. Income Statement For the Year Ended December 31
LIFO
	2012	2013	2014
	$[removed]	$[removed]	$[removed]
	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	$[removed]	$[removed]	$[removed]

Prepare income statements under FIFO for 2012, 2013, and 2014.

TAVERAS CO. Income Statement For the Year Ended December 31
FIFO
	2012	2013	2014
	$[removed]	$[removed]	$[removed]
	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	$[removed]	$[removed]	$[removed]

Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method for 2014 and 2013.

TAVERAS CO. Income Statement For the Year Ended December 31
	2014	2013
	$[removed]	$[removed]
	[removed]	[removed]
	[removed]	[removed]
	$[removed]	$[removed]

Prepare comparative retained earnings statements for 2013 and 2014 under FIFO.

	2014	2013
	$[removed]	$[removed]
:	[removed]	[removed]
	$[removed]	[removed]
:	[removed]	[removed]
	$

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Accounting: Exercise 22-3 - Taveras Co. decides at the beginning of 2014...

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