Use the following for Questions 23 and 24: Chris Co. began operations in 2012 an

Question

Use the following for Questions 23 and 24:

Chris Co. began operations in 2012 and for simplicity reasons, adopted FIFO pricing for inventory. In 2014, in accordance with other companies in its industry, Chris Co. changed its inventory pricing to Weighted Average The pretax income data is reported below: Year Weighted Average FIFO 2012 $400,000 $410,000 2013 $300,000 $340,000 2014 $550,000 $600,000 Assume a 30% tax rate in all years.

1: The change in accounting principle would cause beginning retained earnings to be adjusted by what amount?

increase beginning retained earnings by $100,000

decrease beginning retained earnings by $70,000

decrease beginning retained earnings by $35,000

increase beginning retained earnings by $50,000.

2: What would Chris Co. report for Net Income after tax for 2014

Explanation / Answer

decrease beginning retained earnings by $70,000 as $ 100,000 profit will be decresed due to change in accounting principle and the net effect to retained earnings is after tax only

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