Choice "a" is correct, as of January 1, 1992, the beginning of the year.

Rule: The cumulative effect of a change in accounting principle equals the difference between

retained earnings at the beginning of period of the change and what retained earnings would have

been if the change was applied to all affected prior periods, assuming comparative financial

statements are not presented. If comparative statements are presented, then beginning retained

earnings of the earliest year presented is adjusted for the cumulative effect of the change. We are

assuming, based on the answer options given, that Harvey is not presenting comparative financial

statements.

Choice "b" is incorrect. The cumulative effect of the change is not determined as of the date the

decision is made.

Choices "c" and "d" are incorrect. The cumulative effect of the change is not determined by a

weighted average.