During 2015, Magma Company changed its inventory valuation method from LIFO to FIFO. The following information shows the effect of this change.

Instructions:
1. Before the change from LIFO to FIFO, the Retained Earnings balance on January 1, 2013, was $700,000. Magma Company does not pay any dividends. Prepare the comparative statement of retained earnings, reflecting the change to FIFO, for 2013, 2014, and 2015.
2. What additional information would you need to prepare all the necessary disclosures to include in the notes to the 2015 financial statements?

Transcribed Image Text:

Net Income Computed Using LIFO Excess of LIFO Cost of Goods Sold over FIFO Cost of Goods Sold Income Effect (Net of Tax) $95,700 38,500 45,000 80,000 Year $130,000 52,000 66,000 Prior to 2013 2013 $310,000 2015