Sandstone, Inc., has consistently included some factory overhead as a current expense rather than as a cost of producing goods.As a result, the beginning inventory for 2019 is understated by $10,000.If Sandstone voluntarily changes accounting methods effective January 1, 2019, the positive adjustment to the inventory is a § 481 adjustment, and $2,500 must be added to taxable income for each year 2019, 2020, 2021, and 2022.

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The statement is correct. When there is a change in accounting method that results in a § 481 adjustment, the positive adjustment is spread out over four years and must be added to taxable income in equal amounts for each year. In this case, the positive adjustment is $10,000, divided by four years, which equals $2,500 per year.