Handout Problem for Chapter 22 - Change in Accounting Principle pany A began operations in 20x and switches inventory valuation methods from the specific identification method to the average cost method in 20x2. Ignore income tax effects. Assume the following information. Specific Identification Average Cost Cost of Cost of Year Goods Sold Goods Sold 20x1 $2,000 $4,000 20X2 5,000 6,000 Net income as originally reported in 20x1 before the change was: Sales Cost of goods sold (assumes Specific ID) Gross profit Expenses Net income 20X1 13,000 2,000 11,000 5,000 6.000 Retained earnings as originally reported in 20x1 before the change was: Dinning retained earnings + income nding retained earnings 20X1 0 6,000 6.000 What is the journal entry necessary in 20x2 to record the change from specific identification to average cost? Prepare the 20x2 comparative income statement (show both years 20x2 and 20x1). Assume that 20x2 Sales were $11,000 and 20x2 Expenses were $2,000. Prepare the 20x2 comparative statement of retained earnings