1. (20 pts) The financial statements using FIFO of Grady Company for 2016 and 2017 appear below:

Dec 31, 2017 Dec 31, 2016

Cash $10,000 $15,000

Receivables 12,000 10,000

Inventories (FIFO) 21,000 18,000

Other Assets 30,000 20,000

$73,000 $63,000

Capital Stock $30,000 $30,000

Retained Earnings 43,000 33,000

$73,000 $63,000

Income $ 10,000 $ 10,000

Retained Earnings 1/1 $ 33,000 $ 33,000

Dividends 0 ( 10,000)

Retained Earnings 12/31$ 43,000 $ 33,000

Grady changed to LIFO at the beginning of 2017. December 31 inventories at LIFO were $14,000 for 2016 and $20,000 for 2017. The beginning inventory of 2016 was zero.

A. Recast the above Income and Retained Earnings statement for 2017 under LIFO, assuming that 2017 will be shown alone and without any comparison to 2016.

B. Journalize the prior period correction at January 1, 2017.