2 The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2019 and 2020. At the beginning of 2021, Pyramid decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2019-2021. The income tax rate for all years is 25%. Dints Income before Income Tax Using Average Using LIFO Income Cost Method Method Difference Tax Effect $ 86,400 $57,600 $28,800 $7,200 42,000 33,600 8,400 2,100 $128,400 $91,200 $37,200 $9,300 $ 49,800 $45,400 $ 4,400 $1,100 2019 2020 Total 2021 Difference after Tax $21,600 6,300 $27,900 $ 3,300 eBook Print Pyramid issued 44,000 $1 par, common shares for $200,000 when the business began, and there have been no changes in paid- in capital since then. Dividends were not paid the first year, but $11,000 cash dividends were paid in both 2020 and 2021. References Required: 1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle. 2. Prepare the 2021-2020 comparative income statements beginning with income before income taxes. 3. Prepare the 2021-2020 comparative statements of shareholders' equity. (Hint: The 2019 statements reported retained earnings of $43,200. This is $57,600 -($57,600 x 25%)]. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the journal entry at January 1, 2021, to record the change in accounting principle. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet X 2 The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2019 and 2020. At the beginning of 2021, Pyramid decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2019-2021. The income tax rate for all years is 25%. pints 2019 2020 Total 2021 Income before Income Tax Using Average Using LIFO Income Cost Method Method Difference Tax Effect $ 86,400 $57,600 $28,800 $7,200 42,000 33,600 8,400 2,100 $128,400 $91,200 $37,200 $9,300 $ 49,800 $45,400 4,400 $1,100 Difference after Tax $21,600 6,300 $27,900 $ 3,300 eBook Pyramid issued 44,000 $1 par, common shares for $200,000 when the business began, and there have been no changes in paid- in capital since then. Dividends were not paid the first year, but $11,000 cash dividends were paid in both 2020 and 2021. Print References Required: 1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle. 2. Prepare the 2021-2020 comparative income statements beginning with income before income taxes. 3. Prepare the 2021-2020 comparative statements of shareholders' equity. (Hint: The 2019 statements reported retained earnings of $43,200. This is $57,600 - ($57,600 x 25%)). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the 2021-2020 comparative income statements beginning with income before income taxes. (Round EPS answers to 2 decimal places.) 2020 COMPARATIVE INCOME STATEMENTS 2021 Income before income taxes Income tax expense Net income $ 0 Earnings per share $ 0 2 2020 Total 2021 42,000 $128,400 $ 49,800 33,600 $91,200 $45,400 8,400 $37,200 $ 4,400 2,100 $9,300 $1,100 6,300 $27,900 $ 3,300 Pyramid issued 44,000 $1 par, common shares for $200,000 when the business began, and there have been no changes in paid- in capital since then. Dividends were not paid the first year, but $11,000 cash dividends were paid in both 2020 and 2021. pints Required: 1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle. 2. Prepare the 2021-2020 comparative income statements beginning with income before income taxes. 3. Prepare the 2021-2020 comparative statements of shareholders' equity. (Hint: The 2019 statements reported retained earnings of $43,200. This is $57,600 - ($57,600 * 25%)]. eBook Print Complete this question by entering your answers in the tabs below. References Required 1 Required 2 Required 3 Prepare the 2021-2020 comparative statements of shareholders' equity. (Hint: The 2019 statements reported retained earnings of $43,200. This is $57,600 - ($57,600 x 25%).] (Deductions should be indicated by a minus sign.) PYRAMID COMPANY Statement of Shareholders' Equity For the Years Ended Dec. 31, 2021 and 2020 Additional Common Retained Stock Paid in Capital Earnings Total Shareholders' Equity Balance at Jan. 1, 2020 Net income Cash dividends Balance at Dec 31, 2020 $ 0 $ 0 $ 0 $ 0 Net income Cash dividends Balance at Dec 31, 2021 $ 0 $ 0 $ 0 $ 0