Recording Entry and Determining Effect on Reporting for Change in Accounting Principle

Sterling Co$.$ changed from average cost to FIFO on January $1$ of Year $3.$ Inventory balances on December $31$ under both methods follow for the prior two year$-$ends. Sterling Co$.$ has a December $31$ year$-$end.

a$.$ Prepare the entry on January $1$ of Year $3$ to record the accounting change. Ignore taxes.

b$.$ For external reporting purposes, the company reports comparative balance sheets for Year $3$ and Year $2.$ What amount of inventory is reported on the balance sheet for December $31$ of Year $2?$

Year $2.$ Ignore taxes.

$-$ Note: Indicate a decrease with a negative sign, if applicable.

Cumulative effect of change in accounting principle reported in beginning retained earnings in Year $2$: $\backslash (\backslash$$ $\backslash )$

Cumulative effect of change in accounting principle reported in beginning retained earnings in Year $3$: $\backslash (\backslash$$ $\backslash )$