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 2011. At December 31, 2010, inventories were $119,000 (average cost basis) and were $123,000 a year earlier. Cecil-Booker's accountants determined that the inventories would have totaled $150,000 at December 31, 2010, and $155,000 at December 31, 2009, if determined on a FIFO basis. A tax rate of 40% is in effect for all years.
One hundred thousand common shares were outstanding each year. Income from continuing operations was $390,000 in 2010 and $500,000 in 2011. There were no extraordinary items either year.
Required:
(1) Prepare the journal entry to record the change in accounting principle.