PROBLEM: Change in Principle Until the end of 2019, ABC used the LIFO method to account for its inventory for both financial and tax purposes. Effective January 1, 2020, ABC justifiably changed the method of valuing its inventory on the books and on the payroll to Weighted Average. The business tax rate is .35 for all years Here is some information related to this change:

Periodo = Period

Antes = Before

Costo de lo Vendido = Cost of Goods Sold

Diferencia Bruta = Gross Difference

Diferencia Neta = Net difference

Promedio= Average

INSTRUCTIONS: Answer the following questions. Show your computations whenever possible. You can solve the problem in Excel and upload the file. WORD documents, photos or emails are not accepted

REQUIRED 1: Prepare the necessary journal entry to record this change in 2020.

	DR	CR

REQUIRED 2: Assume the ending inventory reported in the 2019 10K was $270,000. Indicate the ending inventory balance to be reported in the 2019 Statement of Financial Position included in the 2020 10K.

REQUIRED 3: Assume the business reported net income of $540,000 in the 2019 10K. Complete the following statement of retained earnings for the 2020 10K. The business has never paid dividends.

10K report 2020 ABC, Inc. Statement of Retained Earnings For the period ending December 31

	2020	2019
Initial Balance, as reported 1/1		$90,000
Adjustment for change in principle
Adjusted Initial Balance
Net Income	550,000
Final Balance 12/31

\begin{tabular}{|c|c|c|c|c|c|} \hline Periodo & \multicolumn{2}{|c|}{ Costo de lo Vendido } & Diferencia Bruta & Taxes & Diferencia Neta \\ \cline { 2 - 6 } & LIFO & Promedio & & & \\ \hline Antes del 2019 & 295,000 & 177,000 & 118,000 & 41,300 & 76,700 \\ \hline 2019 & 132,750 & 86,288 & 46,463 & 16,262 & 30,201 \\ \hline Total & 427,750 & 263,288 & 164,463 & 57,562 & 106,901 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|} \hline Periodo & \multicolumn{2}{|c|}{ Costo de lo Vendido } & Diferencia Bruta & Taxes & Diferencia Neta \\ \cline { 2 - 6 } & LIFO & Promedio & & & \\ \hline Antes del 2019 & 295,000 & 177,000 & 118,000 & 41,300 & 76,700 \\ \hline 2019 & 132,750 & 86,288 & 46,463 & 16,262 & 30,201 \\ \hline Total & 427,750 & 263,288 & 164,463 & 57,562 & 106,901 \\ \hline \end{tabular}