FTC Company had used the FIFO method of inventory valuation since it began operations in 2016. The entity de change to the weighted average method for measuring inventory at the beginning of 2019. The income tax rate The following schedule shows year-end inventory balances: Year FIFO Weighted Average 2016 P4,500,000 P5,400,000 2017 7,800,000 7,100,000 2018 8,300,000 7,800,000 What amount should be reported for 2019 as the cumulative effect of the change in accounting policy?

FTC Company had used the FIFO method of inventory valuation since it began operations in 2016. The entity de change to the weighted average method for measuring inventory at the beginning of 2019. The income tax rate The following schedule shows year-end inventory balances: Year FIFO Weighted Average 2016 P4,500,000 P5,400,000 2017 7,800,000 7,100,000 2018 8,300,000 7,800,000 What amount should be reported for 2019 as the cumulative effect of the change in accounting policy?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

FTC Company had used the FIFO method of inventory valuation since it began operations in 2016. The entity decided to
change to the weighted average method for measuring inventory at the beginning of 2019. The income tax rate is 30%.
The following schedule shows year-end inventory balances:
Year FIFO
Weighted Average
2016
P4,500,000
P5,400,000
2017
7,800,000
7,100,000
2018
8,300,000
7,800,000
What amount should be reported for 2019 as the cumulative effect of the change in accounting policy?
(A P500,000 decrease in retained earnings
B P350,000 increase in retained earnings
(C P350,000 decrease in retained earnings
D P500,000 increase in retained earnings

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