Pharoah Incorporated declded to change from the FIFO method of valulng Inventory

Question

Pharoah Incorporated declded to change from the FIFO method of valulng Inventory to the welghted average method In July 2017, The cumulative effect on prior years of retrospective application of the new Inventory costing method was determined to be $21,500 net of $7,000 tax. As prices are decreasing, cost of sales would be lower and ending inventory higher for the preceding period. Retained earnings on January 1. 2017 was $243,500 to the owedghted aver inn are decrease (a1) Prepare a partial statement af ratained carnings illustrating the adjusted balance af retained carnings. Statement of Retained Earnings (Partial)

Explanation / Answer

Pharoah Incorporated Statement of Retained Earnings (Partial) As on Jan 1, 2017 Balance as on Jan 1, 2017 $243,500 Add: Retrospective effect due to change in the inventory method,net off taxes $21,500 Adjusted Balance as on Jan 1, 2017 $265,000

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