Discuss AICPA CPA-Financial Exam Topic 3 Question 55

On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants, made changes in accounting policies, corrected several errors dating from 1992 and before, and instituted new accounting policies.

Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.

This question represents one of Quo's transactions. List A represents possible clarifications of these transactions as: a change in accounting principle, a change in accounting estimate, a correction of an error in previously presented financial statements, or neither an accounting change nor an accounting error.

Item to Be Answered

Quo changed from LIFO to FIFO to account for its finished goods inventory.

List A (Select one)

AChange in accounting principal.

BChange in accounting estimate.

CCorrection of an error in previously presented financial statements.

DNeither an accounting change nor an accounting error.

Suggested Answer: A

Choice 'a' is correct. Change from LIFO to FIFO is a change in accounting principle.

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13 comments · newest first

Ernie 11 months ago

I think it's more complicated than just a principle change.

Chauncey 11 months ago

It's not an estimate, so it has to be A.

Rodrigo 12 months ago

Wait, can they just switch like that? Seems odd.

Billy 12 months ago

Agreed, LIFO to FIFO is a big shift!

Tarra 12 months ago

Definitely a change in accounting principle.

Daisy 1 year ago

I'm a bit confused about this one. I thought it might be a correction of an error, but I guess it's more about the method used, so maybe it's just a change in principle?

Latricia 1 year ago

I remember that switching inventory methods is usually classified as a change in accounting principle, but I wonder if there are specific disclosures required.

Nu 1 year ago

This reminds me of a practice question where we discussed similar changes. I believe it's a change in accounting principle, but I could be wrong.

Halina 1 year ago

I think changing from LIFO to FIFO is definitely a change in accounting principle, but I'm not entirely sure if there are any exceptions.

Glen 1 year ago

I'm a bit confused by this question. I know there are a few different places in the PVWA where you can manage approvals, but I'm not sure which one is the correct location for this specific scenario. I think I'll need to review the documentation or ask a colleague for help on this one.

Aleisha 1 year ago

I remember we discussed how to automate configurations with Bash scripts, but I'm not completely sure what the right process is in this case.

Twila 1 year ago

I vaguely remember that EIGRP uses a combination of factors for its metric, but I'm not sure what exactly it includes.

Whitley 1 year ago

This seems straightforward enough. I just need to plug the numbers into the right formula and do the calculation. As long as I don't make any silly mistakes, I should be able to get the right answer.

AICPA CPA-Financial Exam - Topic 3 Question 55 Discussion