Sampress, Inc., reported inventory in the 2017 year-end balance sheet, using the average cost method, as $342,000. In 2018, the company decided to change its inventory method to FIFO. If the company had used the FIFO method in 2017, ending inventory would have been $367,000. What adjustment would Sampress make for this change in inventory method?
A) Debit Inventory for $25,000; Credit Retained earnings for $25,000.
B) Debit Inventory for $367,000; Credit Cost of goods sold for $367,000.
C) Debit Cost of goods sold for $25,000; Credit Inventory for $25,000.
D) No adjustment is necessary.

Question

Quizplus · Accepted Answer

The adjustment records the increase in inventory of $25,000 ($367,000 ? $342,000) and the increase in retained earnings, as if FIFO had been used in 2017.