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 $ 430 $ 440 $ 470 Cost of goods sold (FIFO) (43 ) (45 ) (51 ) Cost of goods sold
(average) (62 ) (66 ) (72 ) Operating expenses (262 ) (270 ) (274 ) Dividends of $24 million were
paid each year. Fieris fiscal year ends December 31. Required: 1. Prepare the journal entry at the
beginning of 2021 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare
the 20212020 comparative income statements. 3. & 4. Determine the balance in retained earnings
at January 1, 2020 as Fieri reported using FIFO method and determine the adjustment of balance
in retained earnings as on January 1, 2020 using average method instead of FIFO method..
During 2019 its first year of operations and 2020 Fieri F.pdf
1. During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing
method for both financial reporting and tax purposes. At the beginning of 2021, Fieri decided to
change to the average method for both financial reporting and tax purposes. Income components
before income tax for 2019, 2020, and 2021 were as follows: ($ in millions) 2019 2020 2021
Revenues $ 430 $ 440 $ 470 Cost of goods sold (FIFO) (43 ) (45 ) (51 ) Cost of goods sold
(average) (62 ) (66 ) (72 ) Operating expenses (262 ) (270 ) (274 ) Dividends of $24 million were
paid each year. Fieris 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 20212020 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.
