Return to questo 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% Income before Income Tax Using Average Cost Using LIFO Income Difference Method Method Difference Tax Effect 2019 after Tax $ 93,600 $ 62,400 $31,200 $ 7,800 $23,400 2020 48,000 38,400 9,600 2,400 7,200 Total $141,600 $100,800 $40, 800 $10,200 $30,600 2021 $ 52,200 $ 46,600 $ 5,600 $ 1,400 $ 4,200 Pyramid issued 61,000 $1 par, common shares for $260,000 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 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 $46,800. This is $62,400 - ($62,400 25%) - you wens 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.) No Date General Journal Debit Credit 1 January 01, 2021 Inventory 40,800 Income tax payable 10,200 Retained earnings 30,600 Required 2 > 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.) COMPARATIVE INCOME STATEMENTS 2021 Income before income taxes $ 52,200 $ Income tax expense 13.050 Net income $ 39,150 $ $ Earnings per share 107 X $ colo 2020 48.000 12.000 36,000 0.98 x Required 1 Required 2 Required 3 Prepare the 2021-2020 comparative statements of shareholders' equity. (Hint: The 2019 statemfits reported retained earnings of $46,800. This is $62,400 - ($62,400 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 Common Additional Total Retained Paid-in Stock Earnings Shareholders Capital Equity $ 61,000 $ 199,000 $ 70,200 $ 330,200 60,000 60,000 (10,000) (10,000) S 61,000 $ 199,000 $ 120,200 S 380,200 65.250 65.250 Balance at Jan 1, 2020 Net income Cash dividends Balance at Dec 31, 2020 Net income