How should a company account for a change in inventory valuation method from FIFO to Weighted Average? a) Apply the change prospectively to new purchases b) Record as a change in estimate in current period c) Retrospectively restate prior periods d) Disclose in notes only without adjustment

How should a company account for a change in inventory valuation method from FIFO to Weighted Average? a) Apply the change prospectively to new purchases b) Record as a change in estimate in current period c) Retrospectively restate prior periods d) Disclose in notes only without adjustment

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 13GI: What is the basic assumption underlying the gross profit method? How may the gross profit percentage...

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Question

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How should a company account for a change in inventory valuation method from
FIFO to Weighted Average?
a) Apply the change prospectively to new purchases
b) Record as a change in estimate in current period
c) Retrospectively restate prior periods
d) Disclose in notes only without adjustment

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What is the basic assumption underlying the gross profit method? How may the gross profit percentage for the prior year be modified to provide a better estimate of the inventory value?
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