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)201920202021Revenues$420 $430 $460 Cost of goods sold (FIFO) (42) (44) (50)Cost of goods sold (average) (60) (64) (70)Operating expenses (258) (266) (270) Dividends of $23 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.

PLEASE LIKE THE ANSWER, YOUR RESPONSE MATTERS Prepare the journal entry at the beginning of 2013…

Answered: During 2019 (its first year of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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	$	420		$	430		$	460
Cost of goods sold (FIFO)		(42	)		(44	)		(50	)
Cost of goods sold (average)		(60	)		(64	)		(70	)
Operating expenses		(258	)		(266	)		(270	)

Dividends of $23 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.

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