Fava Company began operations in 2015 and used the LIFO inventory method for both financial reporting and income taxes. At the beginning of 2016, the anticipated cost trends in the industry had changed, so that it adopted the FIFO method for both financial reporting and income taxes. Fava reported revenues of $300,000 and $270,000 in 2016 and 2015, respectively. Fava reported expenses (excluding income tax expense) of $125,000 and $120,000 in 2016 and 2015, which included cost of goods sold of $55,000 and $45,000, respectively. An analysis indicates that the FIFO cost of goods sold would have been lower by $8,000 in 2015. The tax rate is 30%. Fava has a simple capital structure with 15,000 shares of common stock outstanding during 2015 and 2016. It paid no dividends in either year. Required: 1. Prepare the journal entry to reflect the change. 2. At the end of 2016, prepare the comparative income statements for 2016 and 2015. Notes to the financial statements are not necessary. 3. At the end of 2016, prepare the comparative retained earnings statements for 2016 and 2015.