The Cumulative Effect on Prior Years' Earnings of a Change

question 30

Multiple Choice

The cumulative effect on prior years' earnings of a change in accounting principle should be reported separately as an adjustment to retained earnings for the earliest period presented for all of the following changes except

• A) completed-contract method of accounting for long-term construction-type contracts to the percentage-of-completion method.
• B) percentage-of-completion method of accounting for long-term construction-type contracts to the completed-contract method.
• C) FIFO method of inventory pricing to LIFO method.
• D) LIFO method of inventory pricing to the weighted-average method.

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Definitions:

Automatic Responses

Reactions that occur with little to no conscious thought, often resulting from learned behaviors or innate instincts.

Programmed

Refers to something that is set up or prepared in advance according to a plan, often used in the context of computer programming or automated processes.

Nonprogrammed

Decisions or actions that are made in response to novel, unpredictable, or unique situations, requiring customized solutions.

Problem-solving

The process of identifying a challenge, difficulty, or discrepancy and applying logical reasoning or creativity to find a solution.