During 2011, 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, 2009, was $700,000. Magma Company does not pay any dividends. Prepare the comparative statement of retained earnings, reflecting the change to FIFO, for 2009, 2010, and 2011.
2. What additional information would you need to prepare all the necessary disclosures to include in the notes to the 2011 financialstatements?

Transcribed Image Text:

Net Income Computed Excess of LIFO Cost of Goods Sold over Income Effect Year Using LIFO IFO Cost of Goods Sold (Net of Tax) Prior to 2009 2009 2010 2011 $130,000 $310,000 240,000 500,000 52,000 66,000 96,000 95.700 38,500 45,000 80,000