AICPA Exam CPA-Financial Topic 1 Question 102 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 102
Topic #: 1

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?

A$5,000 decrease.

B$3,000 decrease.

C$2,000 increase.

D$0.

Show Suggested Answer

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

16 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

8 days ago

Jeffrey: I'm leaning towards option B, a $3,000 decrease.

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Honey

13 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

19 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

24 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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