On January 1, 2019, Belmont Company changed
its inventory cost flow method to the FIFO
method from the LIFO method. Belmont can
justify the change that was made for both financial
statement and income tax reporting purposes.
Belmont’s inventories were $4,000,000 on the
LIFO basis at December 31, 2018. Supplementary
records maintained by Belmont showed that
the inventories would have totaled $4,800,000 at
December 31, 2018, on the FIFO basis. Ignoring
income taxes, the adjustment for the effect
of changing to the FIFO method from the LIFO
method should be reported by Belmont as an:
a. $800,000 adjustment to cost of goods sold
on the 2019 income statement
b. $800,000 increase to the 2019 beginning
balance of retained earnings
c. $800,000 gain on the 2019 income
statement
d. $800,000 decrease to the 2019 beginning
balance of retained earnings