Accounting Change Example ABC Company switched from FIFO to weighted average in 2015. The audtor concurred with the change and the 2015 income statement information below is prepared using weighted average. The 2013 & 2014 information is what was reported in those years under FIFo. 2013 2014 2015 Sales-net $16,673 $18,221 $18898 Cost of goods sold Gross profit Administrative expenses Income before taxes Income taxes (50%) Net income 14.831 15,670 16,880 2,551 2,018 1,842 1,010 1,644 822 1,029 515 ABC has determined their income statements for 2013 and 2014 under weighted average would have been as follows: 2014 2013 $16.673 $18.221 14,885 Sales-net Cost of goods sold Gross profit Administrative expenses Income before taxes Income taxes (50%) Net income 1,788 2,443 907 1,536 956 47 1. What amount of cumulative effect should be recorded on the books in 2015? What accounts are affected? 2. If 2015 financial statements are presented on a stand-alone basis, what amount of cumulative effect adjustment is shown to beginning retained earnings? If 2015 financial statements contain 2014 financials for comparative purposes, what amount of cumulative effect adjustment is shown to beginning retained earnings? For what year? 3. 4. If 2015 financial statements contain 2014 &2013 financials for comparative purposes what amount of cumulative effect adjustment is shown to beginning retained earnings? For what year