On January 1, 2010, Roem Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a 500,000 increase in the January 1, 2010 inventory. Assume that the income tax rate for all years is 30%. The cumulative effect of the accounting change should be reported by Roem in its 2010 a. Retained earnings statement as a 350,000 addition to the beginning balance. b. Income statement as a 350,000 cumulative effect of accounting change. c. Retained earnings statement as a 500,000 addition to the beginning balance. d. Income statement as a 500,000 cumulative effect of accounting change.
On January 1, 2010, Roem Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a 500,000 increase in the January 1, 2010 inventory. Assume that the income tax rate for all years is 30%. The cumulative effect of the accounting change should be reported by Roem in its 2010 a. Retained earnings statement as a 350,000 addition to the beginning balance. b. Income statement as a 350,000 cumulative effect of accounting change. c. Retained earnings statement as a 500,000 addition to the beginning balance. d. Income statement as a 500,000 cumulative effect of accounting change.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 3MC
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On January 1, 2010, Roem Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a 500,000 increase in the January 1, 2010 inventory. Assume that the income tax rate for all years is
30%. The cumulative effect of the accounting change should be reported by Roem in its 2010
a.
b. Income statement as a 350,000 cumulative effect of accounting change.
c. Retained earnings statement as a 500,000 addition to the beginning balance.
d. Income statement as a 500,000 cumulative effect of accounting change.
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