During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financi

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During 2019 (its first year of operations) and 2020, Fieri Foods
used the FIFO inventory costing method for both financial reporting
and tax purposes. At the beginning of 2021, Fieri decided to change
to the average method for both financial reporting and tax
purposes. Income components before income tax for 2019, 2020, and
2021 were as follows: ($ in millions) 2019 2020 2021 Revenues $ 410
$ 420 $ 450 Cost of goods sold (FIFO) (41 ) (43 ) (49 ) Cost of
goods sold (average) (58 ) (62 ) (68 ) Operating expenses (254 )
(262 ) (266 ) Dividends of $22 million were paid each year. Fieri’s
fiscal year ends December 31.
Required: 1. Prepare the journal entry at the beginning of 2021
to record the change in accounting principle. (Ignore income
taxes.)
2. Prepare the 2021–2020 comparative income statements. 3. &
4. Determine the balance in retained earnings at January 1, 2020 as
Fieri reported using FIFO method and determine the adjustment of
balance in retained earnings as on January 1, 2020 using average
method instead of FIFO method.