Answer:
The journal entry would be as follows:
December 31, 2020 Debit Credit
Retained Earnings $9,400,000
Inventory $9,400,000
Explanation:
In order to prepare the journal entry to record the adjustment, we would have to calculate the amount of inventory with the following formula:
Amount of inventory=December 31, 2020, CPS’s inventories (FIFO)-31, 2020, CPS’s inventories (Average Cost)
=$38 million-$28.6 million
=$9.4 millions
Therefore, the journal entry would be as follows:
December 31, 2020 Debit Credit
Retained Earnings $9,400,000
Inventory $9,400,000
