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Recording Entry and Determining Effect on Reporting for Change in Accounting Principle Sterling Co. changed from average cost to FIFO on January 1, 2021. Inventory balances under both methods follow. Sterling Co. has a December 31 year-end. Inventory Balances, Dec. 31 2020 2019 Ending inventory, average cost $ 39,000 $ 26,000 Ending inventory, FIFO 23,400 18,200 a. Prepare the entry in the company's accounting system on January 1, 2021, to record the accounting change. Ignore taxes Cr. Jan. 1, 2021 Date Account Name Dr. b. For external reporting purposes on December 31, 2021, the company reports comparative balance sheets for 2021 and 2020. What amount of inventory is reported on the December 31, 2020, balance sheet? Balance Sheet, Dec. 31 2020 Assets c. What cumulative effect of change in accounting principle is reported as an adjustment to retained earnings in 2021? in 2020? Assume comparative financial statement presentation of years ended December 31, 2021, and 2020. Ignore taxes. Note: Indicate a decrease with a negative sign. Cumulative effect of change in accounting principle reported in beginning retained earnings in 2020: $ Cumulative effect of change in accounting principle reported in beginning retained earnings in 2021: 2019 Recording Entry and Determining Effect on Reporting for Change in Accounting Principle Sterling Co. changed from average cost to FIFO on January 1, 2021. Inventory balances under both methods follow. Sterling Co. has a December 31 year-end. Inventory Balances, Dec. 31 2020 Ending inventory, average cost $ 39,000 $ 26,000 Ending inventory, FIFO 23,400 18,200 a. Prepare the entry in the company's accounting system on January 1, 2021, to record the accounting change. Ignore taxes Account Name Jan. 1, 2021 Date Dr. Cash ompany reports comparative balance sheets for 2021 and 2020. What ance sheet? b. For exter Accounts Receivable amount of Inventory Allowance to Reduce Inventory to Net Realizable Value Allowance to Reduce Inventory to Market Value Assets Accounts Payable Bonus Payable Estimated Liability on Purchase Commitment c. What cur Retained Earnings comparativ Retained EarningsPrior Period Adjustment Note: Indic cost of Goods Sold Cumulative Compensation Expense Holding Loss on Inventory Cumulative Estimated Loss on Purchase Commitment ported as an adjustment to retained earnings in 2021? in 2020? Assume ecember 31, 2021, and 2020. Ignore taxes. Sales tained earnings in 2020: $ Etained earnings in 2021: N/A Check Balance Sheet, Dec. 31 2020 Assets $ nciple is reported as an adjustment to retained earnings in 2021? in 2020? Assume s ended December 31, 2021, and 2020. Ignore taxes. beginning retained earnings in 2020: $ beginning retained earnings in 2021: C. Cash CO Accounts Receivable Nd Inventory Allowance to Reduce Inventory to Net Realizable Value Cu Allowance to Reduce Inventory to Market Value Accounts Payable Bonus Payable Estimated Liability on Purchase Commitment Retained Earnings Retained EarningsPrior Period Adjustment Sales Cost of Goods Sold Compensation Expense Holding Loss on Inventory Estimated Loss on Purchase Commitment N/A Next