Which of the following statements regarding changing inventory methods is true?
A)A change in inventory methods can be justified if the change is made to better match profits with revenue.
B)Changing inventory methods affects consistency.
C)One place that the reader of an annual report would be able to identify that a company changed inventory methods is the statement of stockholders' equity.
D)Tax advantages are valid justification for changing inventory methods.

Question

Quizplus · Accepted Answer

Changing inventory methods affects consistency. This is because consistency in accounting methods is crucial to maintain the comparability of financial statements over time. A change in inventory methods can lead to inconsistency in the financial statements, making it difficult to compare financial information from one period to another. Therefore, it is important to disclose any changes in inventory methods in the footnotes to the financial statements. The other options are incorrect because a change in inventory methods should not be made solely for tax advantages, and the statement of stockholders' equity is not the appropriate place to disclose the change. Also, while a change in inventory methods can affect profits and revenue recognition, it is not always justified to make such a change solely for this purpose.

Which of the Following Statements Regarding Changing Inventory Methods Is