Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under the FIFO and average cost methods:

Year	FIFO			Average Cost
2018	$	45,700		$	55,400
2019		80,100			71,700
2020		85,800			80,100

Required: 1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method. 2. How much higher or lower would cost of goods sold be in the 2020 revised income statement?

2*******

COGS for 2020 would be _________,_______________ in the revised income statement.

For each of the following inventory errors occurring in 2021, determine the effect of the error on 2021's cost of goods sold, net income, and retained earnings using understated (U), overstated (O), or no effect (NE). Assume that the error is not discovered until 2022 and that a periodic inventory system is used. Ignore income taxes. Cost of Goods Retained Net Income Sold Earnings Overstatement of ending inventory 1 U Overstatement of purchases 2. Understatement of beginning inventory 3 4. Freight-in charges are understated Understatement of ending inventory 5. Understatement of purchases 6 7 Overstatement of beginning inventory 8 Understatement of purchases plus understatement of ending inventory by the same amount For each of the following inventory errors occurring in 2021, determine the effect of the error on 2021's cost of goods sold, net income, and retained earnings using understated (U), overstated (O), or no effect (NE). Assume that the error is not discovered until 2022 and that a periodic inventory system is used. Ignore income taxes. Cost of Goods Retained Net Income Sold Earnings Overstatement of ending inventory 1 U Overstatement of purchases 2. Understatement of beginning inventory 3 4. Freight-in charges are understated Understatement of ending inventory 5. Understatement of purchases 6 7 Overstatement of beginning inventory 8 Understatement of purchases plus understatement of ending inventory by the same amount