Reference no: EM132462748

Problem - 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.

Date	Inventory Determined by		Cost of Goods Sold Determined by
	LIFO Method	FIFO Method	LIFO Method	FIFO Method
January 1, 2018	$0	$0	$0	$0
December 31, 2018	100	8	760	852
December 31, 2019	180	240	1,080	928
December 31, 2020	300	390	1,070	1,040

Retained earnings reported under LIFO are as follows.

	Retained Earnings Balance
December 31, 2018	$1,480
December 31, 2019	2,640
December 31, 2020	3,810

 Other information -

1. For each year presented, sales are $3,220 and operating expenses are $980.

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

Required -

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

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