The effect of a switch from Average Costing to FIFO would affect which section of the income statement:
A)Cost of Goods Sold
B)Net of Tax Adjustment
C)Comprehensive Income
D)cumulative accounting adjustments

Question

Quizplus · Accepted Answer

The switch from Average Costing to FIFO would affect the Cost of Goods Sold section of the income statement. FIFO (First-In, First-Out) assumes that the first units purchased are the first to be sold, resulting in a different calculation of cost of goods sold compared to Average Costing, which averages the cost of all units purchased. This change in method would result in a different cost of goods sold amount and impact the gross profit and net income.

The Effect of a Switch from Average Costing to FIFO