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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On January 1, 2023 , Linda Corp. changed from the average cost to the dollar value LIFO method for accounting for inventory. The change results in a decrease in ending inventory of $45,497,000 for the year. How should the effect of this change be reported by Linda Corp. in 2023? (RE& CF 1) As an increase to beginning RE of $ 45,497,000 As a decrease to beginning RE of $45,497,000 As an increase to net income of $45,497,000 As a decrease to net income of $45,497,000
How much is the cumulative effect of this change that should be reported in the income statement for the year ended December 31, 2021?
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3. How much is the cumulative effect of this change that should be reported in the income statement for the year ended December 31, 2021?