Comet Company began operations in 2010 and adopted the FIFO method of inventory pricing. During 2012, Comet Company decided to change its method of inventory pricing from FIFO to weighted-average. Using FIFO, Comet's pretax income during 2010, 2011, and 2012 was $395,000, $430,000, and $450,000, respectively. Under the weighted-average method, however, pretax income in each year decreases to $370,000, $390,000, and $410,000, respectively.
Assume that the 2012 financial statements reflect the current change in accounting principle and that the company reports only the 2012 results in its financial statements (e.g. this is the earliest year presented). The company is taxed at a 35% tax rate. What amount will be reported as an adjustment to the beginning balance of retained earnings in 2012 to reflect the change in accounting principle?
Image text transcribed for accessibility Comet Company began operations in 2010 and adopted the FIFO method of inventory pricing. During 2012, Comet Company decided to change its method of inventory pricing from FIFO to weighted-average. Using FIFO, Comet's pretax income during 2010, 2011, and 2012 was $395,000, $430,000, and $450,000, respectively. Under the weighted-average method, however, pretax income in each year decreases to $370,000, $390,000, and $410,000, respectively. Assume that the 2012 financial statements reflect the current change in accounting principle and that the company reports only the 2012 results in its financial statements (e.g. this is the earliest year presented). The company is taxed at a 35% tax rate. What amount will be reported as an adjustment to the beginning balance of retained earnings in 2012 to reflect the change in accounting principle?