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
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