Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2024, the company decided to switch to the average cost method. Data for 2024 are as
follows:

Additional Information:
a. The company’s effective income tax rate is 40% for all years.
b. If the company had used the average cost method prior to 2024, ending inventory for 2023 would have been $130,000.
c. 7,000 units remained in inventory at the end of 2024.

Required:
1. Ignoring income taxes, prepare the 2024 journal entry to adjust the accounts to reflect the average cost method.
2. What is the effect of the change in methods on 2024 net income?

Transcribed Image Text:

Beginning inventory, FIFO (5,000 units @ $30) Purchases: 5,000 units @ $36 5,000 units @ $40 Cost of goods available for sale Sales for 2024 (8,000 units @ $70) $180,000 200,000 $150,000 380,000 $530,000 $560,000