Delta CoBegan Operations on January 1,2012 Required:
A

Delta Co.began operations on January 1,2012.During 2012 and 2013,the company used the weighted-average method for its inventory costing.In 2014,the company changed its method of inventory costing to FIFO so that its financial statements would be more comparable to those of other firms in its industry.If the FIFO method had been used,Delta's cost of goods sold would have been $45,000 less in 2012 and $35,000 less in 2013.Delta's income statements,as originally presented,appear below.Delta's tax rate is 30%.
$\begin{array}{lrrr} & \mathbf{2 0 1 2} & \mathbf{2 0 1 3} &{\mathbf{2 0 1 4}} \\\text { Sales } & \$ 1,000,000 & \$ 1,100,000 & \$ 1,210,000 \\\text { Cost of goods sold } & 645,000 & 695,000 & 726,000 \\\text { Gross profit } & 355,000 & 405,000 & 484,000 \\\text { Selling, general and administrative expenses } & 250,000 & 255,000 & 265,000 \\\text { Depreciation expense } & 55,000 & 55,000 & 55,000\\\text { Income before tax } & 50,000 & 95,000 & 164,000 \\\text { Income tax expense } & \underline{15,000} & \underline{28,500} & \underline{49,200} \\\text { Net income } & \underline{\underline{\$ 35,000}} & \underline{\underline{\$ 66,500}} & \underline{\underline{\$ 114,800}}\end{array}$
Required:
a.Assume that for comparison purposes Delta presents 2012 and 2013 income statements in its 2014 annual report.Revise Delta's 2012 and 2013 income statements to appear as they should in the 2014 annual report.
b.Prepare the journal entry required in 2014 to record Delta's change in accounting principle.