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AICPA Exam CPA-Financial Topic 1 Question 102 Discussion

Actual exam question for AICPA's CPA-Financial exam
Question #: 102
Topic #: 1
[All CPA-Financial Questions]

Goddard has used the FIFO method of inventory valuation since it began operations in 1987. Goddard decided to change to the weighted-average method for determining inventory costs at the beginning of 1990. The following schedule shows year-end inventory balances under the FIFO and weighted-average methods:

What amount, before income taxes, should be reported in the 1990 retained earnings statement as the cumulative effect of the change in accounting principle?

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Suggested Answer: B

Choice 'B' is correct. If comparative FS are issued, restate prior year's FS. If comparative FS are not issued, restate prior year-end's retained earnings account by 'adjusting' (net of tax) the opening balance of the current retained earnings statement.


by Gearldine at Oct 22, 2024, 11:12 PM

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Tomas
4 hours ago
Oh man, I hate these accounting questions. Why can't they just ask something simple, like 'What's the meaning of life?' That I could answer easily.
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Nina
2 days ago
Hmm, I'm pretty sure the answer is B) $3,000 decrease. The change in method would result in a lower inventory value, so it has to be a decrease in retained earnings.
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Zoila
5 days ago
But changing to weighted-average method should result in a decrease in retained earnings, so A) makes more sense.
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Deane
8 days ago
This is a tricky one. I'm going to have to really think through the FIFO and weighted-average methods to figure out the correct answer.
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Josefa
9 days ago
I disagree, I believe the answer is B) $3,000 decrease.
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Zoila
16 days ago
I think the answer is A) $5,000 decrease.
upvoted 0 times
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