Jacob, Inc., changed from the average cost to the FIFO cost flow assumption in 2012.the increase in the prior year`s income before taxes is €1,100,000.The tax rate is 35%.Jacob's 2012 journal entry to record the change in accounting policy will include.

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The change in accounting policy results in an increase in income before taxes, which means there is a deferred tax liability. The tax effect of the increase (€1,100,000 * 35%) is €385,000, which is credited to deferred Tax Liability.