On January 1, 2015, Down Under, Inc., decided to change from the LIFO method of inventory valuation to the FIFO method. The net income (using LIFO) for the four years Down Under has been in business is as follows:

Analysis of the inventory records revealed that the following inventories were on hand at the end of each year as valued under both the LIFO and FIFO methods.

For simplicity, assume that Down Under's sales for each year are $500,000. The income tax rate is 40%. Down Under has only two expenses-cost of goods sold and income tax expense.
Instructions:
1. Prepare the three-year comparative income statement for 2015 which will include FIFO numbers for 2015 and retrospectively adjusted FIFO numbers for 2013 and 2014.
2. Prepare the three-year comparative retained earnings statement for Down Under for 2015. Note that the company started business on January 1, 2012. Dividends declared and paid have been as follows: 2012, $10,000; 2013, $15,000; 2014, $15,000; 2015, $25,000.
3. Prepare the year-by-year income statement note disclosure that Down Under must provide in the notes to its 2015 financial statements.

2014 $156,000 2012 2013 $120,000 138,000 3 2015 180,000 LIFO Method FIFO Method January 1, 2012 December 31, 2012 December 31, 2013 December 31, 2014 December 31, 2015 0 178,000 220,000 252,000 295,000 0 208,000 216,000 290,000 349,000 .. . . .