A Company Changed Its Method of Inventory Pricing from Last-In

question 6

Multiple Choice

A company changed its method of inventory pricing from last-in, first-out to first-in, first-out during the current year. Generally accepting accounting principles require that this change in accounting method be reported by:

• A) Accounting for the effects of the change in the current and future periods.
• B) Showing the cumulative effect of the change in the current year's financial statements and pro forma effects on prior year's financial statements in an appropriate footnote
• C) Disclosing the reason for the change in the "significant accounting policies" footnote for the current year but not restating prior year financial statements
• D) Applying retroactively the new method in restatements of prior years and appropriate footnote disclosures

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Definitions:

Residual Income

The amount of income that an entity has after all personal debts and expenses, including the mortgage, have been paid.

Minimum Required Rate

The lowest acceptable rate of return on investment or performance metric that a company or project must achieve.

Casket Division

A business unit or segment within a company that specializes in the production or sale of caskets.

Operating Assets

Assets used by a business in its day-to-day operations to generate revenue, such as machinery, equipment, and inventory.