On January 1, 2010, Roem Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a 500,000 increase in the January 1, 2010 inventory. Assume that the income tax rate for all years is 30%. The cumulative effect of the accounting change should be reported by Roem in its 2010 a. Retained earnings statement as a 350,000 addition to the beginning balance. b. Income statement as a 350,000 cumulative effect of accounting change. c. Retained earnings statement as a 500,000 addition to the beginning balance. d. Income statement as a 500,000 cumulative effect of accounting change.
On January 1, 2010, Roem Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a 500,000 increase in the January 1, 2010 inventory. Assume that the income tax rate for all years is 30%. The cumulative effect of the accounting change should be reported by Roem in its 2010 a. Retained earnings statement as a 350,000 addition to the beginning balance. b. Income statement as a 350,000 cumulative effect of accounting change. c. Retained earnings statement as a 500,000 addition to the beginning balance. d. Income statement as a 500,000 cumulative effect of accounting change.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2010, Roem Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a 500,000 increase in the January 1, 2010 inventory. Assume that the income tax rate for all years is
30%. The cumulative effect of the accounting change should be reported by Roem in its 2010
a.
b. Income statement as a 350,000 cumulative effect of accounting change.
c. Retained earnings statement as a 500,000 addition to the beginning balance.
d. Income statement as a 500,000 cumulative effect of accounting change.
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