Loire Co. has used the FIFO method since it began operations in Year 3. Loire...
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Accounting
Loire Co. has used the FIFO method since it began operations in Year 3. Loire changed to the weighted-average method for inventory measurement at the beginning of Year 6. This change was justified. In its Year 6 financial statements, Loire included comparative statements for Year 5 and Year 4. The following shows year-end inventory balances under the FIFO and weighted-average methods:
Year
FIFO
Weighted-Average
3
$ 90,000
$108,000
4
156,000
142,000
5
166,000
150,000
What adjustment, before taxes, should Loire make retrospectively to the balance reported for retained earnings at the beginning of Year 4?
A.
$18,000 increase.
B.
$18,000 decrease.
C.
$0
D.
$4,000 increase.
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