Chapter 22, Problem 3E

To determine

First In First Out (FIFO): First in first out (FIFO) is the method of inventory valuation indicating that the goods first purchased are sold first.

Last In First Out (LIFO) Last in first out (LIFO) is the method of inventory valuation meaning the goods which are purchased last will be sold first.

• (a)

To prepare: To prepare the income statements for the years 2015, 2016, and 2017 under FIFO and LIFO method.

Given information:

	Inventory determined by		Cost of goods sold determined by
Date	LIFO	FIFO	LIFO	FIFO
January 1, 2015	0	0	0	0
December 31, 2015	100	80	800	820
December 31, 2016	200	240	1,000	940
December 31, 2017	320	390	1,130	1,100

To determine

• (b)

To prepare: To prepare the income statements for the year 2016 and 2017 after the changes in the accounting of methods from LIFO to FIFO.

To determine

• (c)

To prepare: To prepare the note to the financial statements describing the change in method of inventory valuation.

To determine

• (d)

To prepare: To prepare statement of comparative retained earnings under FIFO method for the year 2017 and 2018..

Given information:

Dates	Retained earnings balance
December 31, 2015	1,200
December 31, 2016	2,200
December 31, 2017	3,070