Linfei Ltd. has a 31 December year-end, and a tax rate of 25%. Management has asked you to respond to the following situations:

Required:
1. The company has always used the FIFO method of determining inventory costs; starting in 20X7, it will now use average cost. Opening and closing inventories for 20X7 under FIFO are $531,000 and $660,000, respectively. Opening and closing inventories under average cost are $420,000 and $520,000, respectively. Provide the journal entry to record the change.
2. Return to requirement 1. Additional information is as follows:
• In 20X7, opening retained earnings was $873,000. Net income, before any adjustment due to the change in inventory method, was $320,000. Dividends were $47,000.
• In 20X6, opening retained earnings was $802,000, net income was $113,000, and dividends were $42,000.
• For 20X6, opening inventory was $480,000 under FIFO and $400,000 under average cost.

Prepare a comparative retained earnings section of the statement of changes in equity, giving retrospective effect to the change in accounting policy.
3. Return to your retained earnings statement in requirement 2. Prepare a comparative retained earnings statement assuming that comparative balances could not be restated; that is, the only information you have to work with, in addition to the income, retained earnings, and dividend information, is that provided about opening and closing inventory balances in requirement 1.
4. An asset was acquired in 20X4 at a cost of $80,000. The salvage value of $8,000 was estimated.
The asset has been depreciated on the declining-balance method at a rate of 20% in each of 20X4, 20X5, and 20X6. On 1 October of this year, 20X7, management decided to change depreciation methods and will now use the straight-line method. This change is made on the basis of usage information that indicates that the asset is used about the same amount in each year of life. The new estimates are a total life of 11 years and a salvage value of $5,000. Depreciation expense has not yet been recorded for 20X7. Provide the appropriate journal entry/entries.