Chiclet Company Decides at the Beginning of 2014 to Adopt

question 56

Multiple Choice

Chiclet Company decides at the beginning of 2014 to adopt the FIFO method of inventory valuation.The company had been using the LIFO method for financial and tax reporting since it inception on January 1,2012.The profit-sharing agreement was in place for all years prior to the year of change,2014.Payments under this agreement are not an inventoriable cost. Which of the following statements regarding the accounting for the profit-sharing agreement in connection with the change from LIFO to FIFO is correct?

• A) The effects of the change in accounting principle on the profit-sharing agreement must be treated retrospectively.
• B) The effects of the change in accounting principle on the profit-sharing agreement should be reported only in the period in which the change in accounting principle was made.
• C) It would be impracticable to determine the effect on the profit-sharing agreement as a result of the change in accounting principle.
• D) There would be no effect on the profit-sharing agreement as a result of the change in accounting principle.

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Definitions:

Minerals

Naturally occurring, inorganic solid substances with a defined chemical composition and crystalline structure, found in the earth's crust.

Lithosphere

The rigid outer layer of the Earth, consisting of the crust and the uppermost mantle, involved in tectonic activities.

Troposphere

The lowest layer of Earth’s atmosphere, where weather occurs and the majority of airborne pollutants are concentrated.

Hot Air Balloon

is a lighter-than-air aircraft consisting of a bag, known as an envelope, which contains heated air that provides lift, allowing it to float in the atmosphere.