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%. 2019 2020 Total 2021 Income before Income Tax Using Average Cost Using LIFO Method $ 90,000 45,000 $135,000 Method $60,000 36,000 $ 51,000 $96,000 $46,000 Difference $30,000 9,000 $39,000 Income Tax Effect $7,500 2,250 Difference after Tax $22,500 6,750 $9,750 $29,250 $ 5,000 $1,250 $ 3,750 Pyramid 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. 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 $45,000. This is $60,000 - ($60,000 25%).] 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 1 January 01, 2021 Inventory Income tax payable Retained earnings General Journal Debit Credit 39,000 9,750 29,250 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 2020 Income before income taxes $ 51,000 45,000 Income tax expense 12,750 11,250 Net income $ 38,250 $ 33,750 Earnings per share $ 0.77 $ 0.68 Required 1 Required 2 Required 3 Prepare the 2021-2020 comparative statements of shareholders' equity. [Hint: The 2019 statements reported retained earnings of $45,000. This is $60,000 - ($60,000 25%).] (Deductions should be indicated by a minus sign.) PYRAMID COMPANY Statement of Shareholders' Equity For the Years Ended Dec. 31, 2021 and 2020 Additional Common Stock Paid-in Capital Retained Earnings Total Shareholders' Equity Balance at Jan. 1, 2020 $ 50,000 $ 180,000 $ 38,250 268,250 Net income 0 33,750 33,750 Cash dividends 0 0 (10,000) (10,000) Balance at Dec. 31, 2020 $ 50,000 $ 180,000 $ 62,000 $ 292,000 Net income $ $ 0 38,250 38,250 Cash dividends 0 (10,000) (10,000) Balance at Dec. 31, 2021 50,000 $ 180,000 $ 90,250 $ 320,250