A Change from LIFO to FIFO Should Be Accounted for

question 39

Multiple Choice

A change from LIFO to FIFO should be accounted for

• A)by footnote disclosure only
• B)prospectively only
• C)currently and prospectively
• D)retrospectively

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Definitions:

Double-declining-balance Method

An accelerated method of depreciation that counts as an expense twice the straight-line depreciation rate for the declining book value of the asset each year.

Straight-line Method

A method of depreciation that distributes a consistent depreciation expense for an asset throughout its lifetime.

Salvage Value

The estimated residual value of an asset at the end of its useful life, determining how much the asset can be sold for after it is no longer useful for its intended purpose.

Annual Depreciation

The amount of an asset’s cost allocated each year over its useful life, reflecting its consumption, wear and tear, or obsolescence.