Required:

1. Prepare the journal entry at the beginning of 2020 to reflect the change.
2. At the end of 2020, prepare comparative income statements for 2020 and 2019. Notes to the financial statements are not necessary.
3. At the end of 2020, prepare comparative retained earnings statements for 2020 and 2019.

3. At the end of 2020, prepare comparative retained earnings statements for 2020 and 2019.

At the beginning of 2020, Brett Company decided to change from the FIFO to the average cost inventory cost flow assumption for financial reporting purposes. The following data are avaliable in regard to its pretax operating income and cost of goods sold: The income tax rate is 21%, and the company recelved permission from the IRS to also make the change for income tax purposes. Brett has a simple capital ntructure, with 100,000 shares of common stock outstanding. Brett computed its reported income before income taxes in 2020 using the newly adopted inventory oost flow method. Brett's 2019 and 2020 revenues were $1,500,000 and $1,750,000, respectively, Its retained earnings balances at the beginning of 2019 and 2020 (unadjusted) wore $1,264,000 and $1,738,000, respectively. Brett paid no dividends in any year. BRETT COMPANY Score: 8/38 Comparative Retained Earnings Statements For the Years Ended December 31, 2019 - 2020 2 Beginning unadjusted retained earnings Less: Adjustment for the cumulative effect on prior years of retrospectively applying the average cost inventory method 4 Adjusted beginning retained earnings 5 Add: Net income 6. Ending retained earnings \begin{tabular}{|c|c|} \hline 2020 & \multicolumn{1}{c|}{2019} \\ \hline$1,540,000.00 & $(1,120,000.00) \\ \hline 126,000.00 & 91,000.00 \\ \hline$1,414,000.00 & $(1,029,000.00) \\ \hline 553,000.00 & 434,500.002 \\ \hline$1,950,800.00 & $1,554,500.00 \\ \hline \end{tabular} sary. Points: 2.11/10