had used the FIFO method of inventory valuation since it began operations in 2017 CPA Co. decided to change to the weighted average method for determining inventory costs at the beginning of 2019. The following schedule shows year-end inventory balances under FIFO and weighted average method. Weighted Average 5,400,000 7,100,000 7,800,000 Year 2017 FIFO 4,500,000 7,800,000 8,300,000 2018 2019 Assuming the income tax rate is 30%, what amount should be reported in the 2020 Statement of Changes in Equity as the cumulative effect of this accounting change? Indicate whether debit or credit

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Problem 2
CPA Co. had used the FIFO method of inventory valuation since it began operations in 2017. CPA Co.
decided to change to the weighted average method for determining inventory costs at the beginning of
2019. The following schedule shows year-end inventory balances under FIFO and weighted average
method.
Weighted Average
5,400,000
7,100,000
7,800,000
Year
2017
FIFO
2018
2019
4,500,000
7,800,000
8,300,000
Assuming the income tax rate is 30%, what amount should be reported in the 2020 Statement of
Changes in Equity as the cumulative effect of this accounting change? Indicate whether debit or credit.
Transcribed Image Text:Problem 2 CPA Co. had used the FIFO method of inventory valuation since it began operations in 2017. CPA Co. decided to change to the weighted average method for determining inventory costs at the beginning of 2019. The following schedule shows year-end inventory balances under FIFO and weighted average method. Weighted Average 5,400,000 7,100,000 7,800,000 Year 2017 FIFO 2018 2019 4,500,000 7,800,000 8,300,000 Assuming the income tax rate is 30%, what amount should be reported in the 2020 Statement of Changes in Equity as the cumulative effect of this accounting change? Indicate whether debit or credit.
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