On December 31, 2008, Ellworth, Inc. appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial statement and income tax purposes. The change will result in a $1,500,000 increase in the beginning inventory at January 1, 2008. Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is
A) $0.
B) $450,000.
C) $1,050,000.
D) $1,500,000.

Question

Quizplus · Accepted Answer

$1,500,000 × (1 - .3) = $1,050,000.