On 1 January 20X5, Teal Ltd. decided to change the inventory costing method used from average cost (AC) to FIFO to conform to industry practice. The annual reporting period ends on 31 December. The average income tax rate is 30%. The following related data were developed:

Required:
1. Identify the type of accounting change involved. Which approach should be used—prospective, retrospective without restatement, or retrospective with restatement? Explain.
2. Give the entry to record the effect of the change, assuming the change was made only for accounting purposes, not for income tax purposes.
3. Complete the following schedule:

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Beginning inventory, 20X4 Ending inventory: 20X4 20X5 Earnings: 20X4: AC basis 20X5: FIFO basis Retained earnings: 20X4 beginning balance Dividends declared and paid: 20X4 20X5 AC Basis $6,000 8,000 8,800 16,000 24,000 12,800 FIFO Basis $6,000 14,000 15,200 16,400 14,000