During 20x5, Fila Corp. decided to change from the FIFO method of inventory valuation to the weighted-average (WA) method. Inventory balances under each method were as follows. ____ At 1/1/x5, FIFO = $71,000; WA = $77,000. ____ At 12/31/x5, FIFO = $79,000; WA = $83,000. _____ Fila's income tax rate is 30%. What amount should Fila record as the cumulative effect of this accounting change? (Answer is one of the following)
-2,800
-4,200
-5,000
-6,000
-4,000
| PROFIT IF COMPANY FOLLOW FIFO METHOD | |
| CLOSING STOCK | 79000 |
| (LESS) OPENING STOCK | 71000 |
| PROFIT | 8000 |
| TAX ON ABOVE | 2400 |
| NET PROFIT | 5600 |
| PROFIT IF COMPANY FOLLOW LIFO METHOD | |
| CLOSING STOCK | 83000 |
| (LESS) OPENING STOCK | 77000 |
| PROFIT | 6000 |
| TAX ON ABOVE(6000*30/100) | 1800 |
| NET PROFIT | 4200 |
During 20x5, Fila Corp. decided to change from the FIFO method of inventory valuation to the...