Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2016, the company decided to switch to the average cost method. Data for 2016 are as follows:

Beginning inventory, FIFO (6,000 units @ $30) = $180,000

Purchases:

6,000 units @ $36= 216,000

6,000 units @ $40= 240,000

Total= 456,000

Cost of goods available for sale= 636,000

Sales for 2016 (10,000 units @ $78)= 780,000

Additional Information:

a. The company's effective income tax rate is 40% for all years.

b. If the company had used the average cost method prior to 2016, ending inventory for 2015 would have been $156,000.

c. 8,000 units remained in inventory at the end of 2016.

Required:

1. Ignoring income taxes, prepare the 2016 journal entry to adjust the accounts to reflect the average cost method.

2. What is the effect of the change in methods on 2016 net income?

The effect of the change for the year 2016 is a _______ increase/decrease in cost of goods sold resulting in a _______ increase/decrease in income before taxes and a(n) increase/decrease in income after tax.