(Various Changes in Principle—Inventory Methods) Below is the net income of Anita Ferreri Instrument Co., a private corporation, computed under the three inventory methods using a periodic system.

Instructions (Ignore tax considerations.)

(a) Assume that in 2008 Ferreri 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 2008, and show net income reported for 2005, 2006, 2007, and 2008.

(b) Assume that in 2008 Ferreri, which had been using the LIFO method since incorporation in 2005, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2008 and show net income reported for 2005, 2006, 2007, and 2008.

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FIFO Average Cost LIFO 2005 $26,000 $24,000 $20,000 2006 30,000 25,000 21,000 2007 28,000 27,000 24,000 2008 34,000 30,000 26,000