Gordon Company started operations on January 1, 2020, and has used the FIFO method of inventory valuation since its inception. In 2026, it decides to switch to the average-cost method. You are provided with the following information.

Instructions

a. What is the beginning retained earnings balance at January 1, 2022, if Gordon prepares comparative financial statements starting in 2022?

b. What is the beginning retained earnings balance at January 1, 2025, if Gordon prepares comparative financial statements starting in 2025?

c. What is the beginning retained earnings balance at January 1, 2026, if Gordon prepares singleperiod financial statements for 2026?

d. What is the net income reported by Gordon in the 2025 income statement if it prepares comparative financial statements starting with 2023?

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2020 2021 2022 2023 2024 2025 Under FIFO $100,000 70,000 90,000 120,000 300,000 305,000 Net Income Under Average-Cost $ 90,000 65,000 80,000 130,000 290,000 310,000 Retained Earnings (Ending Balance) Under FIFO $100,000 160,000 235,000 340,000 590,000 780,000