Wildhorse Incorporated decided to change from the FIFO method of valuing invento

Question

Wildhorse Incorporated decided to change from the FIFO method of valuing inventory to the weighted average method in July 2017. The cumulative effect on prior years of retrospective application of the new inventory costing method was determined to be $15,000 net of $11,000 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 $250,500.

(a1) Prepare a partial statement of retained earnings illustrating the adjusted balance of retained earnings Wildhorse Incorporated Statement of Retained Earnings (Partial)

Explanation / Answer

Wildhorse Incorporated Statement of Retained Earnings (Partial) As on Jan 1, 2017 Balance as on Jan 1, 2017 $250,500 add: retrospective effect due to change in the inventory method,net off taxes $15,000 Adjusted Balance as on Jan 1, 2017 $265,500

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