Problem 20-5 Change in inventory methods [LO20-2]

Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $29 million higher using FIFO. Retained earnings reported at the end of 2016 and 2017 was $249 million and $269 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $259 million and $281 million, respectively. 2017 net income reported at the end of 2017 was $37 million (LIFO method) but would have been $39 million using FIFO. After changing to FIFO, 2018 net income was $45 million. Dividends of $8 million were paid each year. The tax rate is 40%. Required: 1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. 2. In the 20182017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018? 3. Prepare the 20182017 retained earnings column of the comparative statements of shareholders equity.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the 2018-2017 retained earnings column of the comparative statements of shareholders' equity. (Enter your answers in millions.) FANTASY FASHIONS Statement of Shareholders' Equity For the Years Ended Dec. 31, 2018 and 2017 Total RetainedShareholders Paid-in Capital Earnings Equity ($ in millions) Balance at Jan. 1, 2017 Net income Cash dividends Balance at Dec. 31, 2017 Net income Cash dividends Balance at Dec. 31, 2018