Calculate the balance in retained earnings at time of change

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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 2021. The inventory as reported at the end 0t 2020 using LIFO would have been $53,000 higher using FIFO. Retained earnings at the end of 2020 was reported as $710,000 (reflecting the LIFO method). The tax rate is 35%.

Required -

1. Calculate the balance in retained earnings at the time of the change (beginning of 2021) as it would have been reported if FIFO had been used in prior years.

2. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle.

Reference no: EM133174057

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