A company changed its method of inventory pricing from last-in, first-out to fir

Question

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. 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

b. Applying retroactively the new method in restatements of prior years in the current 10-k or 10-Q and appropriate footnote disclosures

c. Accounting for the effects of the change in the current and future periods.

d. Disclosing the reason for the change in the “significant accounting policies” footnote for the current year but not restating prior year financial statements

Explanation / Answer

The answer is.

B.

Applying retroactively the new method in restatements of prior years in the current 10-k or 10-Q and appropriate footnote disclosures

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