On January 1, 2015, JTC changed to the weighted-average cost method from the first-in, first-out (FIFO)cost method for inventory cost flow purposes.JTC can justify this as a change in policy.The change will result in a $120,000 decrease in the beginning inventory at January 1, 2015.Ignoring income taxes, the cumulative effect of changing to the weighted-average method from the FIFO method must be reported by JTC in the 2015:

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When a company changes its inventory accounting method, the cumulative effect of the change is reported as an adjustment to the beginning balance of retained earnings. In this case, the change results in a decrease in inventory, which would decrease retained earnings, hence a $120,000 debit adjustment.

On January 1, 2015, JTC Changed to the Weighted-Average Cost