Until the end of 2019, ABC used the LIFO method to account for its inventory for both financial and tax purposes. As of January 1, 2020, ABC justifiably changed the method of valuing its inventory on the books and on the payroll to Weighted Average. The company's tax rate is .35 for all years The following is information related to this change:

Period	Cost of goods sold		Diff. rough	Contributive effect	Net Diff.
	LIFO	Average
Before 2019	295,000	177,000	118,000	41,300	76,700
2019	132,750	86,288	46,463	16,262	30,201
Total	427,750	263,288	164,463	57,562	106,901

REQUIRED

1: Prepare the journal entry required to record this change in 2020. 

2: Assume that the ending inventory reported in 10K of 2019 was $ 170,000. Indicate the balance of the ending inventory that will be reported in the 2019 Statement of Financial Position included in the 10K of 2020. 

3: Suppose the company reported a net income of $ 140,000 in 10K of 2019. Complete the following statement of retained earnings for 10K of 2020. The company has never paid dividends.

Report 10K - 2020
ABC, Inc.
Statement of Retained Earnings For the period ended December 31:
                                                                   2020                    2019
Initial Balance, as reported 1/1                                     $90,000
Adjustment for change in principle
Adjusted Initial Balance
Net Income                                           250,000
Final Balance 12/31

Answer rating: 100% (QA)

1 The journal entry required to record this change in 2020 would be as follows Debit Inven... View the full answer