Changes in an Estimate, Such as a Change in the Estimated

question 101

True/False

Changes in an estimate, such as a change in the estimated useful life of an asset for depreciation purposes, affect consistency but not comparability, and therefore require an explanatory paragraph in the audit report.

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Definitions:

Weighted-Average Method

An inventory costing method that assigns cost based on the average cost of goods available for sale during the period.

FIFO Method

An inventory valuation method that assumes the first items placed into inventory are the first sold.

FIFO Method

An inventory valuation method where the oldest inventory items are recorded as sold first, leaving the newest items in inventory.

Conversion Cost

Combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.