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Year Pretax income with weighted average pretax income with FIFO 2018 210,000 240,000 2019 250,000 290,000...

Year Pretax income with weighted average pretax income with FIFO
2018 210,000 240,000
2019 250,000 290,000
2020 175,000 190,000

30% tax. How much would be retained earning due to change in inventory methods?

-49,000

-85,000

-70,000

-59,500

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Expert Solution

Year   Pretax income with weighted average pretax income with FIFO Change in Profit
2018                                               210,000                                                          240,000                             (30,000)
2019                                               250,000                                                          290,000                             (40,000)
2020                                               175,000                                                          190,000                             (15,000)
Total change in Pre-tax Income                             (85,000)
Tax at 30% [$85,000 x 30%]                             (25,500)
Therefore, the change in retained earning due to change in inventory methods [$85,000 - $25,500]                            (59,500)

ekkarill92 answered 2 years ago
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