Essay
Ramsgate Company has used the FIFO method for inventory valuation since it began business in 2005, but has elected to change to the average cost method starting in 2008. Year-end inventory valuations under each method are shown below:
Required:
What journal entry, if any, would Ramsgate record in 2008 for the cumulative effect of the change in accounting principle (ignore income taxes)?
Correct Answer:
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