What amounts will Flay report for net income

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Problem - Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Flay decided to change to the LIFO method. As a result of the change, net income in 2018 was $76 million. lf the company had used LIFO in 2017, its cost of goods sold would have been higher by $7 million that year. Flay's records of inventory purchases and sales are not available for 2016 and several previous years. Last year, Flay reported the following net income amounts in its comparative income statements:

($ in millions)

2017

2016

2015

Net income

$80

$78

$76

Required -

1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.)

2. What amounts will Flay report for net income in its 2018-2016 comparative income statements?

Reference no: EM132785789

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