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Can the company change its inventory accounting method, on what grounds? Discuss two (2) trade-offs for the company

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 2Q: Can a business change from one inventory costing method to another any time they wish? Explain.

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Can the company change its inventory accounting method, on what grounds?
Discuss two (2) trade-offs for the company

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Similar questions

Explain why a company might want to utilize the gross profit method or the retail inventory method for inventory valuation.
How do the perpetual and periodic inventory accounting systems differ from each other?
When would a company use the specific identification method of inventory cost allocation?
The following information is taken from a companys records. Applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?
Why do companies adopt the LIFO method of inventory costing? Your discussion should include the effects on the income statement and balance sheet.
What is the general rule used to determine if a company includes an item in inventory?
Can a business change from one inventory costing method to another any time they wish? Explain.
What three implementation approaches may a company choose when applying the inventory valuation rules?
What is the main difference between a perpetual inventory system and a periodic inventory system? Which system is used more often by major companies?
Generally accepted accounting principles require that the inventory of a company be reported at: Multiple Choice Market value. Historical cost. Lower of cost or market. Replacement cost. Retail value.
Under what circumstances do generally accepted accounting principles permit the use of an inventory cost flow assump-tion? Must a cost flow assumption closely parallel the physi-cal movement of the company’s merchandise?
Explain how the inventory valuation method (LIFO or FIFO) chosen by a company affects the cost of goods sold and net income if prices are rising. What if the prices are declining?