During 2022, Emerald Inc. decided to change from FIFO method of inventory valuation to the weighted average method. January 1 inventory under FIFO 7,100,000 January 1 inventory under weighted average 7,700,000 December 31 inventory under FIFO 7,900,000 December 31inventory under weighted average 8,300,000 In the statement of retained earnings for 2022, what amount should be reported as the pretax cumulative effect of this accounting change?

During 2022, Emerald Inc. decided to change from FIFO method of inventory valuation to the weighted average method. January 1 inventory under FIFO 7,100,000 January 1 inventory under weighted average 7,700,000 December 31 inventory under FIFO 7,900,000 December 31inventory under weighted average 8,300,000 In the statement of retained earnings for 2022, what amount should be reported as the pretax cumulative effect of this accounting change?

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Description: During 2022, Emerald Inc. decided to change from FIFO method of inventory valuation to the weighted average method.January 1 inventory under FIFO 7,100,000January 1 inventory under weighted average 7,700,000December 31 inventory under FIFO 7,900,000

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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During 2022, Emerald Inc. decided to change from FIFO method of inventory valuation to the weighted average method.
January 1 inventory under FIFO 7,100,000
January 1 inventory under weighted average 7,700,000
December 31 inventory under FIFO 7,900,000
December 31inventory under weighted average 8,300,000
In the statement of retained earnings for 2022, what amount should be reported as the pretax cumulative effect
of this accounting change?
(A) 1,000,000 deduction
(B) 1,000,000 addition
C 600,000 deduction
D 600,000 addition

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