In 2018, the Barton and Barton Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2017, B & B's inventories were $32.6 million (FIFO). B & B's records indicated that the inventories would have totaled $24.1 million at December 31, 2017, if determined on an average cost basisIgnoring income taxes, what journal entry will B & B use to record the adjustment in 2018?

Question

Breanna

Business

28 October, 16:10

In 2018, the Barton and Barton Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2017, B & B's inventories were $32.6 million (FIFO). B & B's records indicated that the inventories would have totaled $24.1 million at December 31, 2017, if determined on an average cost basisIgnoring income taxes, what journal entry will B & B use to record the adjustment in 2018?

+3

Answers (1)

Know the Answer?

Emerson Montoya · Answer 1

Answer: The journal entry is as follows:

Explanation:

Given that,

Barton and Barton company's inventories were $32.6 million at December 31st, 2017

But the records of B and B's company indicated that inventories would have totaled $24.1 million December 31st, 2017

Therefore, the journal entry for the adjustment in the records of B and B's company in 2018 is as follows:

Debit Credit

Retained Earnings A/c $8.5 million

To Inventory $8.5 million

Retained Earnings = $32.6 million - $24.1 million

= $8.5 million