Below is the net income of Benchley Instrument AG, a private company, computed under the two inventory

Question:

Below is the net income of Benchley Instrument AG, a private company, computed under the two inventory methods using a periodic system.

FIFO Average-Cost 2016 €26,000 €23,000 2017 30,000 25,000 2018 29,000 27,000 2019 34,000 30,000

Instructions
(Ignore tax considerations.)
a. Assume that in 2019 Benchley decided to change from the FIFO method to the average-cost method of pricing inventories. Prepare the journal entry necessary for the change that took place during 2019, and show net income reported for 2016, 2017, 2018, and 2019.
b. Assume that in 2019 Benchley, which had been using the average-cost method since beginning operations in 2016, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2019, and show net income reported for 2016, 2017, 2018, and 2019.