Question

AC 313

During 2016 (its first year of operations) and 2017, Batali Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Batali decided to change to the average method for both financial reporting and tax purposes. points Income components before income tax for 2018, 2017 and 2016 were as follows ($ in millions): eBook Revenues Cost of goods sold (FIPO) cost of goods sold (average) Operating expenses 2018 $ 510 (55) (80) (290) 2017 $ 480 (49) (74) (286) 2016 $ 470 (47) (70) (278) Referencer Dividends of $28 million were paid each year. Batali's fiscal year ends December 31 Required: 1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2018-2017 comparative income statements. 3. & 4. Determine the balance in retained earnings at January 2017 as Batali reported using FIFO method and determine the adjustment of balance in retained earnings as on January 2017 using average method instead of FIFO method, Complete this question by entering your answers in the tabs below. Rea 1 Ren 2 Ren 3 and 4

Answer 1

Answerin 2017 1 Journal entry 2016 Cost of goods fold (HIFO) | $49 4 7 Cost of goods Sold Coverage) $74 $ 70 Difference $25 $23 :: under Average melted ($25+$23)=$ 48 Cogs is higher Journal Euloy :- Datel pasticulars TL Debit Tcredit 2018 Retained earnings Ale Do $48 $48 Jan To Inventory ?) calculation of comparative Income statements particulars 2018 2017 Revenue $510 $480 Lessi cogs (680) R$74) 1. Gross Margin $450 $406 Less- operatiug expoures ($290) ($2801 Net Income | $140 $140 $12 $ 120 T Revenue Less:- cogs operating expense Net Income T2016 $ 470 $ 47) $278) $ 145 | Amount particulars Retained earnings Jaul, 2017 Add Net Income Less Dividends Retained earnings Dee31, 2017 $ 145 ($28) $117

Revenue Less cost of goods sold operating egpeuges Net Income FIFO | Average $470 1 $ 470 11$47) $70) K*278) ($278) $147 $122 Relained earnings saul, 2016 Add's Net Income L0295 Dividendo Rolained easuings Dec.31, 2016 18147 528) $119 o | $122 428) 9 4