Millington Materials is a leading supplier of building equipment, building products,materials & timber for sale, with over 200 branches across the Mid-South. On January 1, 2016, management decided to change from the LIFO 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 40%.

	Income before Income Tax
	FIFO			Average Cost			Difference
Before 2015	$	20	million	$	13	million	$	7	million
2015		18	million		10	million		8	million
2016		15	million		14	million		1	million

Required:

1.

Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.)

2.

Determine the net income to be reported in the 20162015 comparative income statements.

Which other 2015 amounts would be reported differently in the 20162015 comparative income statements and 20162015 comparative balance sheets than they were reported the previous year?

Earnings per share.

Cost of goods sold.

Income tax expense (and income before income taxes)

Inventory (and total assets)

Deferred tax liability (and total liabilities)

Retained earnings (and total shareholders equity)

4.	Compute the balance of retained earnings on Jan. 1, 2015, Dec. 31, 2015 and Dec. 31, 2016. Cash dividends were $1.5 million each year.