If a Company Changes the Method It Uses to Compute

question 6

Multiple Choice

If a company changes the method it uses to compute the allowance for uncollectible accounts receivable because more recent information has become available,how is this change in method accounted for?

• A)The change is only reported in the current period in which the change is made
• B)The change is reported in all future periods affected by the change
• C)Previously issued financial statements are not adjusted by the change
• D)All of the other answers are correct ways to account for the change

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Definitions:

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First In, First Out."

Periodic Inventory System

A system where inventory levels and the cost of goods sold are determined at the end of the accounting period through physical inventory counts.

Credit Memo

A document issued by a seller to a buyer, reducing the amount the buyer owes to the seller under previous transactions.

Freight Charges

Fees associated with the transport of goods from one place to another, paid by the sender or receiver.