Various Changes in Principle-Inventory Methods Below is the net income of Benchley Instrument Co., a private corporation, computed under the three inventory methods using a periodic system.
FIFO Average Cost LIFO
2008 $26,000 $23,000 $20,000
2009 30,000 25,000 21,000
2010 29,000 27,000 24,000
2011 34,000 30,000 26,000
(Ignore tax considerations.)
(a) Assume that in 2011 Benchley decided to change from the FIFO method to the average cost method of pricing inventories. Prepare the journal entry necessary for the change that took place during 2011, and show net income reported for 2008, 2009, 2010, and 2011.
(b) Assume that in 2011 Benchley, which had been using the LIFO method since incorporation in 2008, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2011 and show net income reported for 2008, 2009, 2010, and 2011.