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The Pyramid Company has used the LIFO method of accounting for inventory during its first...

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Accounting

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The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2014 and 2015. At the beginning of 2016, 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 2014-2016. The income tax rate for all years is 40%. Income before Income Tax Income Tax Effedt $12,560 3,880 Difference after Tax $18,840 5,820 Average Cost Method 2014 2015 LIFO Method 62,800 38,800 Difference $ 31,400 9,700 $ 94,200 48,500 Total 142,700 $101,600 $41,100 $ 16,440 $ 24,660 2016 $ 52,400 S 46,700 5,700 2,280 3,420 Pyramid issued 58,000 $1 par, common shares for $265,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $11,000 cash dividends were paid in both 2015 and 2016. Required 1. Prepare the journal entry 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.) View transaction list Journal entry worksheet

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