Which Statement Concerning Inventory Is Incorrect

question 23

Multiple Choice

Which statement concerning inventory is incorrect?

• A) Consistency rules out ever switching to an alternative accounting method.
• B) Consistency is an important consideration when alternative accounting methods exist.
• C) Once an inventory costing method is selected management should not deliberately switch to another to manipulate profits.
• D) Accounting data produced in different accounting periods is not comparable if arbitrary changes in accounting methods are permitted.

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Definitions:

Economic Life

The estimated period over which an asset is expected to be economically useful to the owner.

Sales-Type Lease

A lease agreement where the lessor recognizes profit or loss upfront due to the difference between the fair value of the asset and its carrying amount.

Initial Direct Costs

Expenses directly associated with obtaining or originating a financing lease, which are often deferred and amortized over the lease term.