In early 2020, Rice Corp. is considering changing its inventory method. Rice currently uses the LIFO method for inventory accounting and tax purposes but is considering either the FIFO method or the Average Cost method (assume the company has maintained sufficient inventory cost data to employ any of the three methods). If Rice Corp. does elect to change its inventory method for reporting purposes then it will also change its inventory method for tax accordingly. There are no permanent or temporary book-tax differences in prior years, and the income tax rate is 20%. Relevant data concerning the alternatives are presented below.

Ending Inventory Values

Year	LIFO (Current)	FIFO (alternative 1)	Average Cost (alternative 2)
2018	285	310	291
2019	325	365	341
2020	390	448	420

REQUIRED: Fill in the blanks.

If Rice Corp. wants to maximize 2020 income for financial reporting, which method should they choose?

Clearly identify by how much income before taxes will be affected under each of the above two alternative methods.

The before tax FIFO income is higher than LIFO income by $ _____ .

The before tax Average Cost income is higher than LIFO income by $ ______ .

Assume Rice Corp switches to FIFO from LIFO in 2020. The journal entry to record the change includes Debit or Credit_____ ? to Retained Earnings by $ _____ , and Debit or Credit? to ITP or DTA or DTL? by $ _____ .

Given the data above, are inventory input prices going Up or Down? .

Assume Rice Corp. switches to FIFO in 2020 and further assume Rice Corp. presents two years’ of comparative financial statements. Net Income under LIFO for 2019 and 2020 are 300 and 500 respectively. Adjust the following Retained Earnings statement to a FIFO basis for 2019 and 2020. Clearly indicate if you are adding (by putting a + sign) or subtracting (by putting a - sign or parentheses around the number ) the effect of the accounting change.

	2020	2019
R/E BEG Balance, as stated	xxxx	3,000 (LIFO)
+/- Cumulative effect of accounting changes	xxxx
Net Income
R/E, END Balance

Assume the company presents three-year comparative financial statements and 2018 NI under LIFO is 150. What is the beginning 2018 Retained Earnings balance under FIFO? $______ What is Net Income for 2018 under FIFO? $ _____ .