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3 March, 20:36

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?

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  1. 3 March, 21:28
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    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
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