Koopman Company began operations on January 1, 2009 and uses the FIFO inventory method for financial reporting and the average-cost inventory method for income taxes. At the beginning of 2011, the company decided to switch to the average-cost inventory method for financial reporting. The company had previously reported the following financial statements for 2010:

An analysis of the accounting records discloses the following cost of goods sold under the FIFO and average-cost inventory methods:

There are no indirect effects of the change in inventory method. Revenues for 2011 total $130,000; operating expenses for 2011 total $30,000. The company is subject to a 30% income tax rate in all years; it pays the income taxes payable of a current year in the first quarter of the next year. The company had 10,000 shares of common stock outstanding during all years; it paid dividends of $1 per share in 2011. At the end of 2011, the company had cash of $10,000, inventory of $24,000, other assets of $70,800, and accounts payable of?. The company desires to show financial statements for the current year and previous year in its 2011 annual report.

Required
1. Prepare the journal entry to reflect the change in methods at the beginning of 2011. Show supporting calculations.
2. Prepare the 2011 annual report. Notes to the financial statements are not necessary. Show supportingcalculations.

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Income Statement Retained Earnings Statement 2010 2010 Revenues $100,000 Beginning retained earnings $15,000 0,500 Cost of goods sold (60,000) Add: Net income $ 40,000 Gross profit Operating expenses Income before income taxes 15,000 Income tax expense Net income Ea $25,500 (25,000 Less: Dividends (6,000) 19,500 Ending retained earnings (4,500) $10,500 rnings per share S1.05 Balance Sheet (12/31/10) Cash $ 3,000 1,800 4,800 82,000 19,500 $111, 100 Inventory Other assets 9,000 Accounts payable 38,000 Incme taxes payable 64,100 Deferred tax liability Common stock, no par Retained earnings $111,100 FIFO Cost Average Cost of Goods Sold of Coods Sold 2009 2010 2011 $50,000 60,000 70,000 $57,000 69,000 80,000