Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows:

Beginning inventory, FIFO (5,500 units @ $27)				$	148,500
Purchases:
5,500 units @ $33	$	181,500
5,500 units @ $37		203,500			385,000
Cost of goods available for sale				$	533,500
Sales for 2018 (8,000 units @ $75)				$	600,000

Additional Information:

1. The company's effective income tax rate is 25% for all years.
2. If the company had used the average cost method prior to 2021, ending inventory for 2020 would have been $126,500.
3. 8,500 units remained in inventory at the end of 2021.

Required: 1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method.

• Record adjustment to reflect average cost method.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit

2. What is the effect of the change in methods on 2021 net income?

The effect of the change for the year 2021 is a					decrease OR increase	in cost of goods
sold resulting in a			decrease OR increase	in income before taxes and a(n)
decrease OR increase	in income after tax.			-	-