Accounting: exercise 22-3 – taveras co. decides at the beginning of

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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.

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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.

 

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