Change in Accounting Principle
During 2008, All Seasons Company changed its inventory valuation method from LIFO to FIFO. The following information shows the effect of this change.
|
|
Net Income |
Excess of LIFO Cost of |
|
|
|
Computed |
Goods Sold over |
Income Effect |
|
Year |
Using LIFO |
FIFO Cost of Goods Sold |
(Net of Tax) |
|
Prior to 2006 |
|
$72,000 |
$43,200 |
|
2006 |
$140,000 |
22,000 |
13,200 |
|
2007 |
130,000 |
24,000 |
14,400 |
|
2008 |
200,000 |
50,000 |
30,000 |
Instructions:
1. Before the change from LIFO to FIFO, the Retained Earnings balance on January 1, 2006, was $300,000. All Seasons Company does not pay any dividends. Prepare the comparative statement of retained earnings, reflecting the change to FIFO, for 2006, 2007, and 2008.
2. What additional information would you need to prepare all the necessary disclosures to include in the notes to the 2008 financial statements?