Question
The Opal Company was incorporated and began operations on January 1, 2016. Opal used the weighted-average method for costing inventories. Effective January 1, 2017, Opal
The Opal Company was incorporated and began operations on January 1, 2016.
Opal used the weighted-average method for costing inventories. Effective January 1, 2017,
Opal changed to FIFO for costing inventories and can justify the change.
Information related to 2016 and 2017 inventory cost and net income is presented below:
2016 2017
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 2016 and 2017.
Required:
Calculate the amount of the cumulative effect of the change on beginning retained earnings on January 1, 2017, that would appear on Opal's statement of retained earnings for the year ended
December 31, 2017.
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