Millington Materials is a leading supplier of building equipment, building products, materials, and timber for sale, with over 200 branches across the Mid-South. On January 1, 2024, management decided to change from the average inventory costing method to the FIFO inventory costing method at each of its outlets. The following table presents information concerning the change. The income tax rate for all years is 25%. Income before Income Tax FIFO Average Cost Difference Before 2023 $ 34 million $ 27 million $ 7 million 2023 46 million 24 million 22 million 2024 29 million 28 million 1 million Required: 1. Prepare the journal entry to record the change in accounting principle. 2. Determine the net income to be reported in the 2024–2023 comparative income statements. 4. Indicate the affect of the change in the 2024–2023 comparative statements of shareholders’ equity assuming cash dividends were $11.50 million each year and that no dividends were paid prior to 2023.
Millington Materials is a leading supplier of building equipment, building products, materials, and timber for sale, with over 200 branches across the Mid-South. On January 1, 2024, management decided to change from the average inventory costing method to the FIFO inventory costing method at each of its outlets.
The following table presents information concerning the change. The income tax rate for all years is 25%.
| Income before Income Tax | ||||||
|---|---|---|---|---|---|---|
| FIFO | Average Cost | Difference | ||||
| Before 2023 | $ 34 | million | $ 27 | million | $ 7 | million |
| 2023 | 46 | million | 24 | million | 22 | million |
| 2024 | 29 | million | 28 | million | 1 | million |
Required:
1. Prepare the
2. Determine the net income to be reported in the 2024–2023 comparative income statements.
4. Indicate the affect of the change in the 2024–2023 comparative statements of shareholders’ equity assuming cash dividends were $11.50 million each year and that no dividends were paid prior to 2023.
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