On December 31, 2020, Healy, Inc. appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial statement and income tax purposes. The change will result in a $500,000 increase in the beginning inventory at January 1, 2020. Assume a 20% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is а. $0. b. $100,000. c. $300,000. d. $400,000.

On December 31, 2020, Healy, Inc. appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial statement and income tax purposes. The change will result in a $500,000 increase in the beginning inventory at January 1, 2020. Assume a 20% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is а. $0. b. $100,000. c. $300,000. d. $400,000.

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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Question

On December 31, 2020, Healy, Inc. appropriately changed its inventory valuation method to FIFO
cost from weighted-average cost for financial statement and income tax purposes. The change will
result in a $500,000 increase in the beginning inventory at January 1, 2020. Assume a 20% income
tax rate. The cumulative effect of this accounting change on beginning retained earnings is
а. $0.
b. $100,000.
c. $300,000.
d. $400,000.

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