ExpertMedium1 markMultiple Choice
CPA · Question 41 · Area III: Select Transactions
A company changes its inventory method from FIFO to Weighted Average. How should this change be reported?
A company changes its inventory method from FIFO to Weighted Average. How should this change be reported?
Answer options:
A.
Retrospective application.
B.
Prospective application.
C.
Correction of error.
D.
In Other Comprehensive Income.
How to approach this question
Change in Accounting Principle (FIFO to Weighted Avg) = Retrospective (Adjust prior periods). <br/>Exception: Change TO LIFO is usually Prospective.
Full Answer
A.Retrospective application.✓ Correct
A
A voluntary change in accounting principle is applied retrospectively to all prior periods presented, unless impractical.
Common mistakes
Thinking all inventory changes are prospective (only change TO LIFO is prospective).
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