During 2016 (its first year of operations) and 2017, Broncos Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Broncos decided to change to the average method for both financial reporting and tax purposes.

Income components before income tax for 2018, 2017, and 2016 were as follows:

($ in millions) 2016 2017 2018

Revenue 380 390 420 COGS (FIFO) (38) (40) (46) COGS (average) (52) (56) (62) Operating expenses (242) (250) (254)

Dividends of $20 million were paid each year. Broncos' fiscal year ends December 31.

Required:

1) Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.)

2) Prepare the 20182017 comparative income statements.

3) Prepare the 2018 statement of retained earnings (2018 only).