The Opal Company was incorporated and began operations on January 1, 2019. Opal used the weighted-average method for costing inventories. Effective January 1, 2020, Opal changed to FIFO for costing inventories and can justify the change. Information related to 2019 and 2020 inventory cost and net income is presented below: 2019 2020 Ending inventory, using: Weighted-average $650,000 $620,000 FIFO 680,000 630,000 Net income 700,000 750,000 (using average) (using FIFO) Opal's income tax rate is 30% for both 2019 and 2020. Required: Calculate the amount of the cumulative effect of the change on beginning retained earnings on January 1, 2020, that would appear on Opal's statement of retained earnings for the year ended December 31, 2020.
The Opal Company was incorporated and began operations on January 1, 2019. Opal used the weighted-average method for costing inventories. Effective January 1, 2020, Opal changed to FIFO for costing inventories and can justify the change. Information related to 2019 and 2020 inventory cost and net income is presented below: 2019 2020 Ending inventory, using: Weighted-average $650,000 $620,000 FIFO 680,000 630,000 Net income 700,000 750,000 (using average) (using FIFO) Opal's income tax rate is 30% for both 2019 and 2020. Required: Calculate the amount of the cumulative effect of the change on beginning retained earnings on January 1, 2020, that would appear on Opal's statement of retained earnings for the year ended December 31, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Opal Company was incorporated and began operations on January 1, 2019. Opal used the weighted-average method for costing inventories. Effective January 1, 2020, Opal changed to FIFO for costing inventories and can justify the change. Information related to 2019 and 2020 inventory cost and net income is presented below:
| 2019 | 2020 | |
| Ending inventory, using: | ||
| Weighted-average | $650,000 | $620,000 |
| FIFO | 680,000 | 630,000 |
| Net income | 700,000 | 750,000 |
| (using average) | (using FIFO) |
Opal's income tax rate is 30% for both 2019 and 2020.
Required:
Calculate the amount of the cumulative effect of the change on beginning
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