Problem
Perera Company has used the average cost method for inventory valuation since it began operations in 2012, but elected to change to the FIFO method in 2015. Year-end inventory valuations under each method are shown below:
|
Year
|
Average Cost
|
FIFO
|
|
2012
|
$42,000
|
$49,000
|
|
2013
|
53,000
|
64,000
|
|
2014
|
58,000
|
68,000
|
|
2015
|
65,000
|
72,000
|
Your boss asks you how Perera should reflect this change in accounting principle in its financial statements for the year ended December 31, 2015 (ignore income taxes). Be complete.