Question

La Casita Restaurants changed from the FIFO method of inventory costing to the weighted average method...

La Casita Restaurants changed from the FIFO method of inventory costing to the weighted average method during 2018. When reported in the 2018 comparative financial statements, the 2017 inventory amount will be:

Multiple Choice

  • Increased.

  • Decreased.

  • Increased or decreased, depending on how prices changed.

  • Unaffected.

Retrospective restatement usually is not used for a:

Multiple Choice

  • Change in accounting estimate.

  • Change in accounting principle.

  • Change in entity.

  • Correction of error.

Business   Accounting   
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Answer #1

Answer :

1. Opion - A, Increased.

Reason : Moving from FIFO to Weighted Average would help lower the Cost allocated to COGS and hence add to profit and increase the value of Inventory by a corresponding value.

2. Opion - A, Change in accounting estimate

Reason :The term retrospective restatement refers to adjusting recognition, measurement and disclosure of all the different amounts of the elements in the financial statement to the point that it seems that an error never occurred. That being said a Retrospective restatement usually is not used for a change in accounting estimate

The prospective approach usually is required for change in accounting estimate.

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