All information needed has been provided. 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 20192021. The income tax rate for all years is 25%.

	Income before Income Tax
	Using Average Cost Method					Using LIFO Method					Difference					Income Tax Effect					Difference after Tax
2019		$	87,000				$	58,000				$	29,000				$	7,250				$	21,750
2020			42,500					34,000					8,500					2,125					6,375
Total		$	129,500				$	92,000				$	37,500				$	9,375				$	28,125
2021		$	50,000				$	45,500				$	4,500				$	1,125				$	3,375

Pyramid issued 44,000 $1 par, common shares for $205,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $10,000 cash dividends were paid in both 2020 and 2021. Required: 1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle. 2. Prepare the 20212020 comparative income statements beginning with income before income taxes. 3. Prepare the 20212020 comparative statements of shareholders equity. [Hint: The 2019 statements reported retained earnings of $43,500. This is $58,000 ($58,000 25%)].

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.)

• Record the change in accounting principle.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
January 01, 2021

Prepare the 20212020 comparative income statements beginning with income before income taxes. (Round EPS answers to 2 decimal places.)

COMPARATIVE INCOME STATEMENTS
	2021	2020
Earnings per share

Prepare the 20212020 comparative statements of shareholders equity. [Hint: The 2019 statements reported retained earnings of $43,500. This is $58,000 ($58,000 25%).] (Deductions should be indicated by a minus sign.)

PYRAMID COMPANY
Statement of Shareholders' Equity
For the Years Ended Dec. 31, 2021 and 2020
	Common Stock	Additional Paid-in Capital	Retained Earnings	Total Shareholders' Equity
Balance at Jan. 1, 2020
Net income
Cash dividends
Balance at Dec. 31, 2020
Net income
Cash dividends
Balance at Dec. 31, 2021