During 2019, CGC Company changed from the FIFO method to the Average Cost method for accounting purposes. Gross profit figures under both methods for the last three years appear below:

FIFO Average Cost

2017 $ 800,000 $ 500,000

2018 950,000 700,000

2019 1,050,000 600,000

$2,800,000 $1,800,000

Assuming an income tax rate of 30% for all years.

What is the effect of this change on the beginning balance of retained earnings of 2019?

Select one:

a. Credit retained earnings by $550

b. Debit retained earnings by $700,000

c. Credit retained earnings by $1,000,000

d. Debit retained earnings by $385