Change of Accounting Principle Purple Corporation has used a first-in-first-out (FIFO) inventory system since it was created. On December 31, 2001, Purple elected to change from the FIFO inventory method to the weightedaverage method. Inventory purchases during 2001 totaled

$350,000. The inventory balance reported by Purple on January 1, 2001, using FIFO was $60,000. A balance of $56,000 would have been reported under weighted average. The ending inventory balance would be reported as $120,000 under FIFO and $105,000 under weighted average.

a. What amount of cost of goods sold would be reported for 2001 if Purple continued using FIFO?

b. What amount will be reported for 2001 using the weighted average method?

c. What amount of cumulative adjustment will be reported in Purple’s 2001 financial statements? Show how the amount of the adjustment is computed. Where will the cumulative adjustment be reported?