Ramsgate Company Has Used the FIFO Method for Inventory Valuation

question 20

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)?

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Definitions:

Strategy Pursued

The specific approach or course of action adopted by an organization or individual to achieve a set goal or objective.

Common Directions

Guidelines or instructions shared among a group to ensure cohesive movements or decisions.

Business-Level Strategy

A plan that outlines how a company will compete in a particular market, including choices about product and service offerings.

Competitive Strategy

A plan of action designed to achieve a sustainable advantage over competitors, through understanding and responding to competitive forces.