Business, 17.04.2020 21:11 pineapplepizaaaaa

In 20X2, the Robinson Company switched its inventory method from FIFO to average cost. Inventories at the end of 20X1 were reported in the balance sheet at $22 million. If the average cost method had been used, 20X1 ending inventory would have been $20 million. Ending inventory in 20X2 is $23 million using the average cost, and would have been $26 million if the company had not switched from the FIFO method. The company's tax rate is 25%.
The effect of the change in method on 20X2 income before taxes is a:

a) Debit retained earnings and credit inventory for $3 million.
b) Debit retained earnings and credit inventory for $2 million.
c) Debit inventory and credit retained earnings for $1 million.
d) Debit inventory and credit cost of goods sold for $3 million.

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In 20X2, the Robinson Company switched its inventory method from FIFO to average cost. Inventories a...

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