Humanoid Company has been using the FIFO method of inventory costing since it began operations in 2019. In 2021 the company changed to the weighted average method (WAM). The following are the December 31 inventory balances under each method. YearFIFOWAM2019500,000565,0002020450,000560,0002021895,000999,000 What is the effect on retained earnings as a result of making the changeon January 1, 2021?- P 104,000 increase- P 6,000 decrease- P 110,000 increase- P 214,000 increase

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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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Humanoid Company has been using the FIFO method of inventory costing since it began operations in 2019. In 2021 the company changed to the weighted average method (WAM). The following are the December 31 inventory balances under each method.

Year	FIFO	WAM
2019	500,000	565,000
2020	450,000	560,000
2021	895,000	999,000

What is the effect on retained earnings as a result of making the change

on January 1, 2021?

- P 104,000 increase

- P 6,000 decrease

- P 110,000 increase

- P 214,000 increase

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