Wish Inc. started operations on January 1, 2020. It originally applied weighted-average cost-flow assumption for inventory accounting. However, after studying the actual, physical flow of its products, the company's management concluded that FIFO is the preferred method and it applied the FIFO method as of January 1, 2022 (i.e., 2022 is the year of the change). The average cost method is still used for income tax purposes.

The company's income statements (under weighted-average inventory accounting method) for fiscal years ended December 31, 2021 and December 31, 2020 are presented below

2021 2020

Sales 600 500

Cost of sales. 350 275

Gross profit 250 225

Selling and

administrative expenses 90 80

Profit before tax 160 145

Taxes 48 44

Net income 112 102

Under theaverage cost method, the company's inventories amounted to $25 million and $30 million at the end of 2020 and 2021 respectively.

The company's cost of goods sold underFIFOwould have been $260 million and $330 million in 2020 and 2021 respectively. Also under the FIFO method, sales, cost of goods sold (COGS) and selling and general expenditures for 2022 are $700 million, $410 million and $120 million respectively.

The company is subject to a 30% tax rate.

Required:

1. Prepare the comparative income statements for Ollie's Inc. for the three year period 2020 to 2022 after the change to FIFO.
2. Determine the after-tax cumulative effect in retained earnings at January 1, 2022.
3. Prepare the journal entry on January 1, 2022 for the change in accounting principle.