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Headland Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Headland 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. Head and 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 LIFO FIFO Date Method Method LIFO Method FIFO Method January 1, 2018 $0 $0 $0 $0 December 31, 2018 100 8 850 942 December 31, 2019 210 250 980 848 December 31, 2020 340 390 1.220 1.210 Retained earnings reported under LIFO are as follows. Retained Earnings Balance $960 December 31, 2018 December 31, 2019 December 31, 2020 1.790 2,380 Other information: 1. For each year presented, sales are $2,780 and operating expenses are $970. Headland provides two years of financial statements. Earnings per share information is not required. 2 (b) Your answer is correct Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method for 2020 and 2019. HEADLAND CO. Income Statement For the Year Ended December 31 2019 2020 Sales 2780 $ 2780 348 i 3210 i Cost of Goods Sold Operating Expenses 970 1 970 i Net Income /(LOS) 962 600 eTextbook and Media Attempts: 1 of 3 used (d) Prepare comparative retained earnings statements for 2019 and 2020 under FIFO. 2019 e Textbook and Media (d) Prepare comparative retained earnings statements for 2019 and 2020 under FIFO. 2019 2020 $ A

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