Late in 20X6, the management of Richter Minerals Inc., a Canadian private company, decided to change the company’s inventory valuation method and, concurrently, its revenue recognition method. Historically, the company had used an average cost basis for all inventories and had recognized revenue when minerals were shipped to customers. Now, effective with the year beginning 1 January 20X7, Richter will recognize revenue when the minerals have been refined and are ready for sale, at which point the inventory will be adjusted to net realizable value at the end of each reporting period. Richter’s minerals are easily sold at any time on the world market via electronic trading. Richter’s shareholders and principal lenders have approved the change in policy.
At the end of 20X6, Richter had inventory (at cost of production) totalling $70 million. Of that total, $20 million was of unrefined ore, and $50 million was refined minerals. At NRV, Richter’s refined minerals inventory was $72 million. The 20X6 opening inventory contained refined minerals of $44 million at cost; using market price indices, Richter’s management was able to determine that the 20X6 opening inventory was worth $60 million at NRV. Richter’s 20X6 sales revenue was $250 million.
During 20X7, Richter recognized revenue of $360 million, on the new reporting basis. Ending inventory of refined minerals amounted to $82 million; production cost was $55 million.
The income tax rate was 25% in both years.

Required:
1. How much will this change affect the previously reported net income for 20X6?
2. Can this change be applied retrospectively with restatement? Explain the difficulties that management might encounter when restating years prior to 20X6.
3. Prepare any journal entries that are necessary to record the change in accounting policies.