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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, 2021, 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 2020 $30 million $16 million $14 million 2020 16 10 6 2021 20 18 2             Required: 1. Prepare the journal entry to record the change in accounting principle. 2. Determine the net income to be reported in the 2021–2020 comparative income statements. 4. Indicate the affect of the change in the 2021–2020 comparative statements of shareholders’ equity assuming cash dividends were $2 million each year and that no dividends were paid prior to 2020.

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, 2021, 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 2020 $30 million $16 million $14 million 2020 16 10 6 2021 20 18 2             Required: 1. Prepare the journal entry to record the change in accounting principle. 2. Determine the net income to be reported in the 2021–2020 comparative income statements. 4. Indicate the affect of the change in the 2021–2020 comparative statements of shareholders’ equity assuming cash dividends were $2 million each year and that no dividends were paid prior to 2020.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
Problem 14P: Gray Company lists the following shareholders equity items on its December 31, 2018, balance sheet:...
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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, 2021, 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 2020 $30 million $16 million $14 million
2020 16 10 6
2021 20 18 2
       

   
Required:
1. Prepare the journal entry to record the change in accounting principle.
2. Determine the net income to be reported in the 2021–2020 comparative income statements.
4. Indicate the affect of the change in the 2021–2020 comparative statements of shareholders’ equity assuming cash dividends were $2 million each year and that no dividends were paid prior to 2020.

Required 1 Required 2 Required 4 Indicate the affect of the change in the 2021-2020 comparative statements of shareholders' equity assuming cash dividends were $2 million each year and that no dividends were paid prior to 2020. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) MILLINGTON SUPPLIES Statement of Shareholders' Equity For the Years Ended Dec. 31, 2021 and 2020 Common Additional Retained Total Shareholders' (S in millions) Stock Paid-in Capital Earnings Equity Balance at Jan. 1, 2020 Balance at Dec. 31, 2020 Balance at Dec. 31, 2021 < Required 2 Required 4 >
Transcribed Image Text:Required 1 Required 2 Required 4 Indicate the affect of the change in the 2021-2020 comparative statements of shareholders' equity assuming cash dividends were $2 million each year and that no dividends were paid prior to 2020. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) MILLINGTON SUPPLIES Statement of Shareholders' Equity For the Years Ended Dec. 31, 2021 and 2020 Common Additional Retained Total Shareholders' (S in millions) Stock Paid-in Capital Earnings Equity Balance at Jan. 1, 2020 Balance at Dec. 31, 2020 Balance at Dec. 31, 2021 < Required 2 Required 4 >
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