On December 31, 2020, Fire Corporation appropriately changed its inventory costing method from FIFO cost to weighted average cost method for financial statement and income tax purposes. The change will result in a P700,000 decrease in the beginning inventory of January 1, 2020. Assume a 30% income tax rate. The amount of adjustment to the January 1, 2020 balance of retained earnings is:P490,000 addition P700,000 additionP490,000 deduction P700,000 deduction

Inventory costing methods can be of various types such as FIFO, LIFO, weighted average etc. The…

Answered: On December 31, 2020, Fire Corporation…

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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On December 31, 2020, Fire Corporation appropriately changed its inventory costing method from FIFO cost to weighted average cost method for financial statement and income tax purposes. The change will result in a P700,000 decrease in the beginning inventory of January 1, 2020. Assume a 30% income tax rate. The amount of adjustment to the January 1, 2020 balance of retained earnings is:
1. P490,000 addition P700,000 addition
2. P490,000 deduction P700,000 deduction

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