Sterling Co. changed from average cost to FIFO on January 1, 2021. Inventory balances under both methods follow. Sterling Co. has a December 31 year-end.

Inventory Balances, Dec. 31	2020	2019
Ending inventory, average cost	$ 15,000	$ 10,000
Ending inventory, FIFO	9,000	7,000

a. Prepare the entry in the company's accounting system on January 1, 2021, to record the accounting change. Ignore taxes

b. For external reporting purposes on December 31, 2021, the company reports comparative balance sheets for 2021 and 2020. What amount of inventory is reported on the December 31, 2020, balance sheet?

choose from these

c. What cumulative effect of change in accounting principle is reported as an adjustment to retained earnings in 2021? in 2020? Assume comparative financial statement presentation of years ended December 31, 2021, and 2020. Ignore taxes.

Note: Indicate a decrease with a negative sign.

Cumulative effect of change in accounting principle reported in beginning retained earnings in 2020:
Cumulative effect of change in accounting principle reported in beginning retained earnings in 2021:

Account Name Dr. Cr. Date Jan. 1, 2021 Balance Sheet, Dec. 31 2020 Assets Cash Accounts Receivable Inventory Allowance to Reduce Inventory to Net Realizable Value Allowance to Reduce Inventory to Market Value Accounts Payable Bonus Payable Estimated Liability on Purchase Commitment Retained Earnings Retained Earnings-Prior Period Adjustment Sales Cost of Goods Sold Compensation Expense Holding Loss on Inventory Estimated Loss on Purchase Commitment N/A Account Name Dr. Cr. Date Jan. 1, 2021 Balance Sheet, Dec. 31 2020 Assets Cash Accounts Receivable Inventory Allowance to Reduce Inventory to Net Realizable Value Allowance to Reduce Inventory to Market Value Accounts Payable Bonus Payable Estimated Liability on Purchase Commitment Retained Earnings Retained Earnings-Prior Period Adjustment Sales Cost of Goods Sold Compensation Expense Holding Loss on Inventory Estimated Loss on Purchase Commitment N/A