Solution for QID #87400: On December 31, 2018, Grantham, Inc., appropriately changed | StudyHelpMe

On December 31, 2018, Grantham, Inc., appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial statement and income tax purposes. The change will result in a $2,000,000 increase in the beginning inventory at January 1, 2018. Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is _________.   a. $0   b. $600,000     c. $1,400,000 This answer is correct.   d. $2,000,000   (Computation: $2,000,000 × (1 - .3) = $1,400,000)   Please help me understand why the $2,000,000 was multipled by 70% instead of 30%? Thank you.