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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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Ressie
2 months ago
Wait, is this a trick question? What if the answer is actually D) $0, and the whole thing is just a ploy to see if we're paying attention?
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Julene
14 days ago
User 3: I'm not sure, but I think it might be D) $0.
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Dierdre
1 months ago
User 2: No, I believe it's A) $5,000 decrease.
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Tenesha
1 months ago
User 1: I think the answer is C) $2,000 increase.
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Tiera
2 months ago
Let's see, if Goddard changed from FIFO to weighted-average, that means their inventory value went down. So it's gotta be a decrease in retained earnings. I'll go with B.
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An
6 days ago
Jeffrey: I'm leaning towards option B, a $3,000 decrease.
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Honey
11 days ago
User 3: So, which option do you think is the correct amount for the cumulative effect of the change?
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Jeffrey
17 days ago
User 2: Yeah, I agree. The inventory value went down, so it makes sense that retained earnings would decrease.
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Miss
22 days ago
User 1: I think the change in accounting principle will result in a decrease in retained earnings.
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Tomas
2 months 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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Shaniqua
1 months ago
User 2: I agree, I wish they were more straightforward like that.
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Thurman
1 months ago
User 1: I know right, accounting questions can be so confusing.
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Nina
2 months 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
2 months 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
2 months 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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Charlena
1 months ago
I agree with the first response, C) $2,000 increase seems correct.
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Lauryn
1 months ago
I believe it's B) $3,000 decrease.
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Temeka
2 months ago
I'm not sure, I think it might be A) $5,000 decrease.
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Sue
2 months ago
I think the answer is C) $2,000 increase.
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Josefa
2 months ago
I disagree, I believe the answer is B) $3,000 decrease.
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Zoila
3 months ago
I think the answer is A) $5,000 decrease.
upvoted 0 times
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