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In 2021, CPS Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2020, CPS’s inventories were $42 million (FIFO). CPS’s records indicated that the inventories would have totaled $31.8 million at

In 2021, CPS Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2020, CPS’s inventories were $42 million (FIFO). CPS’s records indicated that the inventories would have totaled $31.8 million at December 31, 2020, if determined on an average cost basis.
 
Required:
1. Prepare the journal entry to record the adjustment. (Ignore income taxes.) (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Answer #1

dr. retained earnings (42-31.8) 10.2

  cr. inventory                                     10.2

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In 2021, CPS Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2020, CPS’s inventories were $42 million (FIFO). CPS’s records indicated that the inventories would have totaled $31.8 million at
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