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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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