Question
The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021.
The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021. At December 31, 2020, inventories were $127,000 (average cost basis) and were $131,000 a year earlier. Cecil-Booker's accountants determined that the inventories would have totaled $169,000 at December 31, 2020, and $174,000 at December 31, 2019, if determined on a FIFO basis. A tax rate of 25% is in effect for all years.
One hundred thousand common shares were outstanding each year. Income from continuing operations was $470,000 in 2020 and $595,000 in 2021. There were no discontinued operations either year.
I need to figure out how to prepare the journal entry at January 1, 2021, to record the change in accounting principle and prepare the 2021-2020 comparative income statements beginning with income from continuing operations (adjusted for any revisions).
Could I get help with this?
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