Exercise 20-1 Change in principle; change in inventory methods [LO 20-2] During 2016 (its first year of operations) and 2017, Batali Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Batali 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): Revenues Cost of goods sold (FIFO) Cost of goods sold (average) Operating expenses 2018 $ 510 (55) (80) (290) 2017 $ 480 (49) (74) (286) 2016 $ 470 (47) (70) (278) Dividends of $28 million were paid each year. Batali's fiscal year ends December 31. Required: 1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2018-2017 comparative income statements. 3. & 4. Determine the balance in retained earnings at January 2017 as Batali reported using FIFO method and determine the adjustment of balance in retained earnings as on January 2017 using average method instead of FIFO method. Reg 1 Reg 2 Req 3 and 4 Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet Record the change in accounting principle. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2018 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 and 4 Prepare the 2018-2017 comparative income statements. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) COMPARATIVE INCOME STATEMENTS 2018 2017 ($ in millions) Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 and 4 Determine the balance in retained earnings at January 2017 as Batali reported using FIFO method and determine the adjustment of balance in retained earnings as on January 2017 using average method instead of FIFO method. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) ($ in millions) Retained earnings balance previously reported using FIFO, Jan. 1, 2017 Adjustment to balance for change in inventory methods Retained earnings balance using average method, Jan. 1, 2017