Finer Foods, Inc., a chain of supermarkets specializing in gourmet food, has bee

Question

Finer Foods, Inc., a chain of supermarkets specializing in gourmet food, has been using the average cost method to measure its inventory. During the current year, the company changed to the first-in, first-out method of inventory measurement. The president of the company reasoned that this change was appropriate because it would more closely match the flow of physical goods. This change should be reported on the financial statement as a A. Change in an accounting principle. B. Correction of an error. C. Change in an accounting estimate. D. Cumulative-effect type accounting change. Finer Foods, Inc., a chain of supermarkets specializing in gourmet food, has been using the average cost method to measure its inventory. During the current year, the company changed to the first-in, first-out method of inventory measurement. The president of the company reasoned that this change was appropriate because it would more closely match the flow of physical goods. This change should be reported on the financial statement as a A. Change in an accounting principle. B. Correction of an error. C. Change in an accounting estimate. D. Cumulative-effect type accounting change.

Explanation / Answer

The change should be reported on the financial statement as a Cumulative-effect type accounting change. Option D is correct

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