During 2013, 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, 2011, was $700,000. Magma Company does not pay any dividends. Prepare the comparative statement of retained earnings, reflecting the change to FIFO, for 2011, 2012, and 2013.
2. What additional information would you need to prepare all the necessary disclosures to include in the notes to the 2013 financial statements?

Transcribed Image Text:

Net Income Computed Using LIFO Excess of LIFO Cost of Goods Sold over LIFO Cost of Goods Sold Income Effect (Net of Tax) Year $130,000 $95,700 2011 52,000 66,000 96,000 240,000 45,000 500,000