Asked by Lungile Shange on Jun 04, 2024
Verified
The Brown Company changed its method of determining inventories from LIFO to FIFO.This change represents a
A) change in accounting estimate that should be treated prospectively
B) change in accounting principle that should be treated prospectively
C) change in accounting estimate for which the financial results of previous years are restated
D) change in accounting principle for which the financial statements of prior periods included for comparative purposes are restated
FIFO
An accounting method where the first items placed in inventory are the first sold or used.
LIFO
Last In, First Out, an inventory valuation method where the most recently produced items are recorded as sold first.
Inventories
Quantities of goods in stock that are held by a business for the purpose of sale or production.
- Identify the appropriate treatment for changes in accounting principles, including retrospective and prospective applications.
Verified Answer
JB
Jordy BloomJun 05, 2024
Final Answer :
D
Explanation :
Changing the method of determining inventories from LIFO to FIFO represents a change in accounting principle that requires prior period financial statements to be restated for comparative purposes.
Learning Objectives
- Identify the appropriate treatment for changes in accounting principles, including retrospective and prospective applications.
Related questions
All of the Following Would Be Reported Retrospectively by Restating ...
A Change from One Acceptable Accounting Method to Another Is ...
An Entry to Record a Change in Accounting Principle Will ...
GAAP States That If It Is Impractical to Determine the ...
Changes in Accounting Principle and Changes in the Reporting Entity ...