E$21\mathrm{.}3($LO $1)($Accounting Change$)$ Taveras Co$.$ decides at the beginning of $2025$ to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January $1,2023,$ and had maintained records adequate to apply the FIFO method retrospectively. Taveras concluded that FIFO is the preferable inventory method because it reports the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold.

$$

$$ Inventory Determined by$$ Cost of Goods Sold Determined by

Date$$ LIFO Method$$ FIFO Method$$ LIFO Method$$ FIFO Method

January $1,2023$ $ $0$ $ $0$ $ $0$ $ $0$

December $31,20239080860870$

December $31,2024180260900810$

December $31,20252903901,1101,090$

Other information:

$$

For each year presented, sales are $$3,180$ and operating expenses are $$990.$

Taveras provides two years of financial statements. Earnings per share information is not required.

Instructions

Prepare income statements under LIFO and FIFO for $2023,2024,$ and $2025.$

Prepare income statements reporting the retrospective application of the accounting change from the LIFO method to the FIFO method for $2025$ and $2024.$

Prepare the note to the financial statements describing the change in method of inventory valuation. In the note, indicate the income statement line items for $2025$ and $2024$ that were affected by the change in accounting principle.

Prepare comparative retained earnings statements for $2024$ and $2025$ under FIFO. Retained earnings reported under LIFO are as follows:

$$ Retained Earnings Balance

December $31,2023$ $$1,200$

December $31,20242,200$

December $31,20253,070($a$)$

Your answer is correct.

Prepare income statements under LIFO for $2023,2024,$ and $2025.$ Prepare income statements under FIFO for $2023,2024,$ and $2025.$

BONITA CO$.$

Income Statement

For the Year Ended December $31($b$)$

$-$ Your answer is partially correct.

Prepare income statements reporting the retrospective application of the accounting change from the LIFO method to the FIFO method for $2025$ and $2024.$

Operating Expenses