In 2018, CPS Company changed its method of valuing inventory from the FIFO metho
ID: 2583970 • Letter: I
Question
In 2018, CPS Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2017, CPS's inventories were $32 million (FIFO). CPS's records indicated that the inventories would have totaled $23.8 million at December 31, 2017, if determined on an average cost basis. Required: 1. Prepare the journal entry to record the adjustment. (Ignore income taxes.) (Enter your answers in millions (i.e., 5,500,000 should be entered as 5.5). Round your answers to 1 decimal place. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the adjustment necessary to reflect the average cost method Note: Enter debits before credits. Event General Journal Debit CreditExplanation / Answer
Event General Journal Debit Credit 1 Retained Earning $8.2 million Inventory $8.2 million ($32 million - $23.8 million) (Loss in inventory due to change in valuation method)