Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Flay decided to change to the LIFO method. As a result of the change, net income in 2018 was $81 million. If the company had used LIFO in 2017, its cost of goods sold would have been higher by $5 million that year. Flay's records of inventory purchases and sales are not available for 2016 and several previous years. Last year, Flay reported the following net income amounts in its comparative income statements: ($ in millions! Net income 2017 2016 2015 $85 $83 $81 Required: 1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.) 3. What amounts will Flay report for net income in its 2018-2016 comparative income statements? Complete this question by entering your answers in the tabs below. Required 1 Required 3 What amounts will Flay report for net income in its 2018-2016 comparative income statements? (Enter your answers in millions (i.e, 10,000,000 should be entered as 10).) 2018 2017 2016 ($ in millions) Net income S 80 81 83 LIFO LIFO FIFO (revised) Portions of the financial statements for Parnell Company are provided below. PARNELL COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) Revenues and gains Sales $880 Gain on sale of buildings 10 $890 Expenses and loss: Cost of goods sold $340 Salaries 128 48 Insurance Depreciation 131 Interest expense 58 13 718 Loss on sale of machinery Income before tax 172 86 Income tax expense 86 Net income PARNELL COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) Year 2018 2017 Change Cash S 150 S 92 58 Accounts receivable 340 208 132 313 441 (128) (46) Inventory Prepaid insurance Accounts payable Salaries payable Deferred income tax liability 58 104 226 109 117 118 85 33 76 60 16 Bond discount 182 216 (34) Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e, 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) Cash Flows from Operating Activities: Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid for insurance Cash paid for interest Cash paid for income taxes Net cash flows from operating activities $ 0 Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) Cash Flows from Operating Activities: Net income 86 Adjustments for noncash effects: Depreciation expense 131 Gain on sale of buildings (10) Loss on sale of machinery 13 Changes in operating assets and liabilities: Increase in accounts receivable (132) Decrease in inventory 128 Increase in accounts payable Increase in salaries payable 33 Decrease in prepaid insurance 46 Decrease in bond discount 34 Increase in deferred income tax liability 16 Net cash flows from operating activities 345 Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Flay decided to change to the LIFO method. As a result of the change, net income in 2018 was $81 million. If the company had used LIFO in 2017, its cost of goods sold would have been higher by $5 million that year. Flay's records of inventory purchases and sales are not available for 2016 and several previous years. Last year, Flay reported the following net income amounts in its comparative income statements: ($ in millions! Net income 2017 2016 2015 $85 $83 $81 Required: 1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.) 3. What amounts will Flay report for net income in its 2018-2016 comparative income statements? Complete this question by entering your answers in the tabs below. Required 1 Required 3 What amounts will Flay report for net income in its 2018-2016 comparative income statements? (Enter your answers in millions (i.e, 10,000,000 should be entered as 10).) 2018 2017 2016 ($ in millions) Net income S 80 81 83 LIFO LIFO FIFO (revised) Portions of the financial statements for Parnell Company are provided below. PARNELL COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) Revenues and gains Sales $880 Gain on sale of buildings 10 $890 Expenses and loss: Cost of goods sold $340 Salaries 128 48 Insurance Depreciation 131 Interest expense 58 13 718 Loss on sale of machinery Income before tax 172 86 Income tax expense 86 Net income PARNELL COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) Year 2018 2017 Change Cash S 150 S 92 58 Accounts receivable 340 208 132 313 441 (128) (46) Inventory Prepaid insurance Accounts payable Salaries payable Deferred income tax liability 58 104 226 109 117 118 85 33 76 60 16 Bond discount 182 216 (34) Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e, 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) Cash Flows from Operating Activities: Cash received from customers Cash paid to suppliers Cash paid to employees Cash paid for insurance Cash paid for interest Cash paid for income taxes Net cash flows from operating activities $ 0 Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) Cash Flows from Operating Activities: Net income 86 Adjustments for noncash effects: Depreciation expense 131 Gain on sale of buildings (10) Loss on sale of machinery 13 Changes in operating assets and liabilities: Increase in accounts receivable (132) Decrease in inventory 128 Increase in accounts payable Increase in salaries payable 33 Decrease in prepaid insurance 46 Decrease in bond discount 34 Increase in deferred income tax liability 16 Net cash flows from operating activities 345