Question

During year 3, Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted-average method. Inventory balances under each method were as follows: FIFO Weighted-average January 1, year 3 $71,000 $77,000 December 31, year 3 $79,000 $83,000 Orca's income tax rate is 30%. In its year 3 financial statements, what amount should Orca report as the gain or loss on the cumulative effect of this accounting change

Answer 1

Answer:

$0

Explanation:

Since the inventory method changes that means there is no cumulative effect treatment to be done on the income statement. Rather this, the change in the accounting is mentioned, so the retrospective application to the early period would be presented

So neither there would be gain nor loss for this change in the accounting

Hence, the answer should be zero