Millington Materials is a leading supplier of building equipment, building products, materials, and timber for sale,...

Transcribed Image Text:

Millington Materials is a leading supplier of building equipment, building products, materials, and timber for sale, with over 200 branches across the Mid-South. On January 1, 2021, management decided to change from the average inventory costing method to the FIFO inventory costing method at each of its outlets. The following table presents information concerning the change. The income tax rate for all years is 25%. Income before Income Tax Average Cost $13 million 10 million 14 million 2020 2021 FIFO Before 2020 $ 20 million. 18 million 15 million Difference $7 million 8 million 1 million Required: 1. Prepare the journal entry to record the change in accounting principle. 2. Determine the net income to be reported in the 2021-2020 comparative income statements. 4. Indicate the affect of the change in the 2021-2020 comparative statements of shareholders' equity assuming cash dividends were $4.50 million each year and that no dividends were paid prior to 2020. Millington Materials is a leading supplier of building equipment, building products, materials, and timber for sale, with over 200 branches across the Mid-South. On January 1, 2021, management decided to change from the average inventory costing method to the FIFO inventory costing method at each of its outlets. The following table presents information concerning the change. The income tax rate for all years is 25%. Income before Income Tax Average Cost $13 million 10 million 14 million 2020 2021 FIFO Before 2020 $ 20 million. 18 million 15 million Difference $7 million 8 million 1 million Required: 1. Prepare the journal entry to record the change in accounting principle. 2. Determine the net income to be reported in the 2021-2020 comparative income statements. 4. Indicate the affect of the change in the 2021-2020 comparative statements of shareholders' equity assuming cash dividends were $4.50 million each year and that no dividends were paid prior to 2020.

Answer rating: 100% (QA)

Answer J 1 Journal Entry to record the change in accounting principle General Journ... View the full answer