On January 1, 2015, Frost Corp

Multiple Choice

On January 1, 2015, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $700,000 increase in the January 1, 2015 inventory. Assume that the income tax rate for all years is 30%. The cumulative effect of the accounting change should be reported by Frost in its 2015

A) retained earnings statement as a $490,000 addition to the beginning balance.
B) income statement as a $490,000 cumulative effect of accounting change.
C) retained earnings statement as a $700,000 addition to the beginning balance.
D) income statement as a $700,000 cumulative effect of accounting change.