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E 9-24 Change in inventory costing methods. Goddard Company has used the FIFO method of inventory valuation since it began operations in

E 9-24 Change in inventory costing methods. Goddard Company has used the FIFO method of inventory valuation since it began operations in

ANSWER KEY  E 9-24 Change in inventory costing methods

Goddard Company has used the FIFO method of inventory valuation since it began operations in 2008. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2011. The following schedule shows year-end inventory balances under the FIFO and average cost methods:

Year     FIFO                Average Cost
2008    $45,000                       $54,000
2009    78,000             71,000
2010    83,000             78,000

Required:
1. Ignoring income taxes, prepare the 2011 journal entry to adjust the accounts to reflect the average cost method.

2. How much higher or lower would cost of goods sold be in the 2010 revised income statement?