On August 31, year 10, Harvey Co. decided to change from the FIFO periodic inventory system to the weighted average periodic inventory system. Harvey uses US GAAP, is on a calendar year basis, and does not present comparative financial statements. The cumulative effect of the change is determined:
A. As of January 1, Year 10
B. During year 1 by a weighted average of the purchases
C. During the eight months ending august 31, year 10, by a weighted average of the purchases
D. As of august 31, year 10
As of January 1, Year 10
Rule: the cumulative effect of a change in accounting principle equals the difference between retained earnings at the beginning of period of the change and what retained earnings would have been if the change was applied to all affected prior periods, assuming comparative financial statements are not presented. Beginning retained earnings of the earliest year presented is adjusted for the cumulative effect of the change.