Calculate the balance in retained earnings

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Question - Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2011. The inventory as reported at the end of 2010 using LIFO would have been $60,000 higher using FIFO. Retained earnings at the end of 2010 was reported as $780,000 (reflecting the LIFO method). The tax rate is 40%.

Required:

(1) Calculate the balance in retained earnings at the time of the change (beginning of 2011) as it would have been reported if FIFO had been used in prior years.

(2) Prepare the journal entry at the beginning of 2011 to record the change in accounting principle.

Reference no: EM131789930

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