On December 31, 2011, Grantham, Inc. appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial…

On December 31, 2011, 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 $1,500,000 increase in the beginning inventory at January 1, 2011. Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is