Aquatic equipment corporation decided to switch from the lifo method of costing inventories to the fifo method at the beginning of 2018. the inventory as reported at the end of 2017 using lifo would have been $60,000 higher using fifo. retained earnings at the end of 2017 was reported as $780,000 (reflecting the lifo method). the tax rate is 40%. required: 1. calculate the balance in retained earnings at the time of the change (beginning of 2018) as it would have been reported if fifo had been used in prior years. 2. prepare the journal entry at the beginning of 2018 to record the change in accounting principle.

You are the manager of a large crude-oil refinery. as part of the refining process, a certain heat exchanger (operated at high temperatures and with abrasive material flowing through it) must be replaced every year. the replacement and downtime cost in the first year is $165 comma 000. this cost is expected to increase due to inflation at a rate of 7% per year for six years (i. e. until the eoy 7), at which time this particular heat exchanger will no longer be needed. if the company's cost of capital is 15% per year, how much could you afford to spend for a higher quality heat exchanger so that these annual replacement and downtime costs could be eliminated?