Question $7$

On December $31,20\backslash$times $2,$ Grayson Inc. changed its inventory valuation method to FIFO from

weighted$-$average. The change will result in an $$800,000$ increase in the beginning inventory

at January $1,20$x$2.$ Assume a $30\%$ income tax rate. The cumulative effect of this accounting

change on prior periods that will be reported as an adjustment to the beginning balance of

retained earnings is

$$560,000$

$$800,000$

$$-0-$

$$40,000$