On December 31, 2015, Toys Inc. appropriately changed its inventory valuation method from weighted-average cost to FIFO method for financial statement and income tax purposes. The change will result in a $500,000 increase in the beginning inventory at January 1, 2015. Assume a 20% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is
$500,000.
$100,000.
$400,000
$450,000.