When changing from the average cost method to FIFO, the company:
A) Includes in current year's income the cumulative after-tax difference that would have resulted if the company had used FIFO in all prior years.
B) Revises comparative financial statements.
C) Records a journal entry to adjust the book balances from their current amounts to what those balances would have been using FIFO.
D) All of these answer choices are correct.

Question

Quizplus · Accepted Answer

When a company changes its inventory accounting method from average cost to FIFO, it must adjust its financial statements retrospectively. This involves revising comparative financial statements, recording a journal entry to adjust book balances, and including the cumulative after-tax difference in the current year's income.

When Changing from the Average Cost Method to FIFO, the Company