Supplemental Homework 10 Chapter 9 Changes in inventory method (Adapted from from Spiceland et al., Intermediate Accounting, 2020) During 2020 (its first year of operations) and 2021, Redbud Foods used the FIFO cost method. At the beginning of 2022, Redbud changed to the average cost method. Ignore income taxes. The following information is available for 2022, 2021, and 2020: ($ in millions) 2022 2021 2020 Revenues $420 $390 $380 Cost of goods sold (FIFO) (46) (40) (38) Cost of goods sold (average) (62) (56) (52) Operating expenses (254) (250) (240) Dividends (20) (20) (20) Required: 1. Determine the balance in retained earnings at December 31, 2021 (before the change to average cost). 2. Prepare the journal entry at the beginning of 2022 to record the change in inventory cost method. 3. Show the amounts reported on the 2022 comparative income statements (including 2021 and 2020 amounts). 4. What was the effect of the change in inventory method on the companys 2022 net income? 5. Determine the balance in retained earnings at December 31, 2022.