medium · Financial Accounting accounting-cycle-financial-statements
A firm decides to switch its inventory valuation method from FIFO to the weighted-average cost method. This change in accounting principle results in a 10,000 increase to prior-year COGS.
How should this be recorded in the current year's financial statements?
- As a retrospective adjustment to the beginning balance of Retained Earnings
- Prospectively, by increasing current-year COGS to account for the prior-period difference
- As a separate 'Loss on Accounting Change' line on the current-period Income Statement
- Directly to Other Comprehensive Income (OCI) to avoid hitting Net Income
Sign up free to see the explanation and track your rank →
More Financial Accounting accounting-cycle-financial-statements practice
- Which of the following describes the immediate impact on the accounting equation?
- Which of the following accounts is a temporary (nominal) account that must be closed to ze
- What is the necessary adjusting journal entry?
- If employees work 8 hours per day, what is the required wage accrual?
- Under ASC 842, a lessee classifies a lease as 'Operating'. How is the periodic lease expen
- A company holds an investment in bonds classified as 'Availa… — Where is this gain reporte
- What is the balance in the Prepaid Insurance account on the December 31 Balance Sheet?
- What is the final entry to record the share issuance?