The Sally Company was incorporated and began operations on January 1, 2016. Sally used the weighted-average method for costing inventories. Effective January 1, 2017, Sally changed to FIFO for costing inventories and can justify the change.

Information related to 2016 and 2017 inventory cost and net income is presented below:

2016 2017

Ending inventory, using:

Weighted-average $650,000 $620,000

FIFO 680,000 630,000

Net income 700,000 750,000

(using average) (using FIFO)

Sally's income tax rate is 30% for both 2016 and 2017.

Required:

Calculate the amount of the cumulative effect of the change on beginning retained earnings on January 1, 2017, that would appear on Sally's statement of retained earnings for the year ended December 31, 2017.

Answer rating: 100% (QA)

Explanation 1 2016 FIFO ending inventory 680000 ... View the full answer