Exercise $20-1($Algo$)$ Change in principle; change in inventory methods $[$LO$20-2]$

During $2019($its first year of operations$)$ and $2020,$ Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of $2021,$ Fieri decided to change to the average method for both financial reporting and tax purposes.

Income components before income tax for $2019,2020,$ and $2021$ were as follows:

$($$ in millions$)201920202021$

Revenues $ $400$ $ $410$ $ $440$

Cost of goods sold $($FIFO$)(40)(42)(48)$

Cost of goods sold $($average$)(56)(60)(66)$

Operating expenses $(250)(258)(262)$

Dividends of $$21$ million were paid each year. Fieri$$s fiscal year ends December $31.$

Required:

$1.$ Prepare the journal entry at the beginning of $2021$ to record the change in accounting principle. $($Ignore income taxes.$)$

$2.$ Prepare the $20212020$ comparative income statements.

$3.$ & $4.$ Determine the balance in retained earnings at January $1,2020$ as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January $1,2020$ using average method instead of FIFO method.