During Year 2, Orea Corp. decided to change from the FIFO method of inventory valuation to the weighted average method. Inventory balances under each method were as follows:

During Year 2, Orea Corp. decided to change from the FIFO method of inventory valuation to the weighted average method. Inventory balances under each method were as follows:

During Year 2, Orea Corp. decided to change from the FIFO method of inventory valuation to the  weighted average method. Inventory balances under each method were as follows:

January 1, Year 2
December 31, Year 2 $71,000
Orca's income tax rate is 30°/o.
FIFO 79,000
Weighted-average $77,000 83,000 Orea should report the cumulative effect of this accounting change as a(n):

a. Adjustment to beginning retained earnings.
b. Component of income from continuing operations.
c. Extraordinary item.
d. Component of income after extraordinary items.






Answer: A