Martinez Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Martinez 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. Martinez 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 by Cost of Goods Sold Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method January 1, 2018 $ 0 $ 0 $ 0 $ 0 December 31, 2018 100 8 850 942 December 31, 2019 180 250 990 828 December 31, 2020 310 400 1,230 1,210 Retained earnings reported under LIFO are as follows. Other information: 1. For each year presented, sales are $2,780 and operating expenses are $1,010. 2. Martinez provides two years of financial statements. Earnings per share information is not required. A. Prepare income statements under LIFO for 2018, 2019, and 2020. MARTINEZ CO. Income Statement For the Year Ended December 31 LIFO Prepare income statements under FIFO for 2018, 2019, and 2020. MARTINEZ CO. Income Statement For the Year Ended December 31

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 3P: Koopman Company began operations on January 1, 2018, and uses they FIFO inventory method for...

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Martinez Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Martinez 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. Martinez 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 by	Cost of Goods Sold Determined by
Date	LIFO Method	FIFO Method	LIFO Method	FIFO Method
January 1, 2018	$ 0	$ 0	$ 0	$ 0
December 31, 2018	100	8	850	942
December 31, 2019	180	250	990	828
December 31, 2020	310	400	1,230	1,210

Retained earnings reported under LIFO are as follows.

Other information:

For each year presented, sales are $2,780 and operating expenses are $1,010.

Martinez provides two years of financial statements. Earnings per share information is not required.

A. Prepare income statements under LIFO for 2018, 2019, and 2020.

MARTINEZ CO.
Income Statement
For the Year Ended December 31

LIFO

Prepare income statements under FIFO for 2018, 2019, and 2020.

MARTINEZ CO. Income Statement For the Year Ended December 31

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