Reference no: EM131876402
Grant co. began operations on January 1, '08. On January 1, '09 Grant changed its inventory method from LIFO to FIFO for both financial and income tax reporting. If FIFO had been used in prior years, Grant's inventories would have been higher by $60,000 and $40,000 at December 31, '10 and '09 respectively. Grant had a 30% income tax rate. What amount of cumulative effect of this accounting change in its income statement for the year ended December 31, '10?
a. $0
b. $14,000
c. $28,000
d. $42,000
During '08 Slide co. decided to change from the FIFO method of inventory valuation to the weighted-average method. Inventory balances under each method were as follows:
FIFO Weighted-average
January 1, '08 71,000 77,000
December 31, '08 79,000 83,000
Slide's income tax rate is 30%.
In its '08 financial statements, what amount should Slide report as the cumulative effect on the statement of retained earnings?
a. $2,800
b. $4,000
c. $4,200
d. $6,000