The ABC 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, ABC 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	$ 90,000	$60,000	$30,000	$7,500	$22,500
2020	45,000	36,000	9,000	2,250	6,750
Total	$135,000	$96,000	$39,000	$9,750	$29,250
2021	$ 51,000	$46,000	$ 5,000	$1,250	$ 3,750

ABC issued 50,000 $1 par, common shares for $230,000 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.

1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle.