Palmer Co. is evaluating the appropriate accounting for the following items.

1. Management has decided to switch from the FIFO inventory valuation method to the LIFO inventory valuation method for all inventories.

2. When the year-end physical inventory adjustment was made for the current year, the controller discovered that the prior year’s physical inventory sheets for an entire warehouse were mislaid and excluded from last year’s count.

3. Simmons Corporation owns stock of Armstrong, Inc. Prior to 2025, the investment was accounted for using the equity method. In early 2025, Simmons sold part of its investment in Armstrong, and began using the fair value method. In 2025, Armstrong earned net income of $80,000 and paid dividends of $95,000. Prepare Simmons’s entries related to Armstrong’s net income and dividends, assuming Simmons now owns 10% of Armstrong’s stock. Custom Division manufactures large-scale, custom-designed machinery on a contract basis. Management decided to switch from the cost-recovery method to the percentage-of-completion method of accounting for long-term contracts. Identify and explain whether each of the above items is a change in accounting principle, a change in estimate, or an error.