Macintosh Inc. changed from LIFO to the FIFO inventory costing method on January 1, 2021. Inventory values at the end of each year since the Inception of the company are as follows:

FIFO LIFO
2019 $196,000 $178,000
2020 392,000 356,000

Required:
Ignoring Income tax considerations. prepare the entry to report this accounting change

You only need to adjust the ending inventory for 2020, since the ending inventory for 2019 no effect on the income statement. This happens because FIFO always uses the first units purchased to determine the cost of goods sold, and after one year, there is no real effect on net income.

The adjustment for ending inventory 2020 should be:

Dr Merchandise inventory 36,000

    Cr Cost of goods sold 36,000

This adjustment will decrease the expenses during 2020 and increase that year's net income.

answerdata mart;