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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%. Incone before Income Tax FIFO Before 2020 $ 74 million 2020 2021 60 million Average Cost Difference $38 million $36 million 32 million 28 million 64 million 40 million 24 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 $7.50 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%. Incone before Income Tax FIFO Before 2020 $ 74 million 2020 2021 60 million Average Cost Difference $38 million $36 million 32 million 28 million 64 million 40 million 24 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 $7.50 million each year and that no dividends were paid prior to 2020.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 8E: In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because...
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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%. FIFO Income before Income Tax Average Cost $38 million Difference $36 million Before 2020 $ 74 million 60 million 32 million 28 million 64 million 40 million 24 million 2020 2021 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 $7.50 million each year and that no dividends were paid prior to 2020.
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%. FIFO Income before Income Tax Average Cost $38 million Difference $36 million Before 2020 $ 74 million 60 million 32 million 28 million 64 million 40 million 24 million 2020 2021 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 $7.50 million each year and that no dividends were paid prior to 2020.
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