1. If a company were to choose one inventory valuation method in the current year, and then decide in the following year to change inventory valuation methods to a method that better approximates the company’s actual costs:
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   1. Would this be accounted for as a change in accounting estimate or a change in accounting principle?  
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   3. Where is the Example provided in the Codification that illustrates the guidance for the retrospective application of a change from LIFO to FIFO (assuming it is practicable to determine the cumulative effect of the change for all prior years)?   

2. ABC Company is a manufacturing company. Based on the criteria in the Codification, explain why each of the following items would or would not be included in Inventory Cost for ABC. 
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   1. Expenses incurred for marketing to sell ABC’s inventory
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   2. General & administrative expenses incurred by ABC that are not clearly related to production
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   3. Normal freight charges paid by ABC to its suppliers for inventory items purchased
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   4. Abnormally high freight charges paid by ABC to its suppliers for inventory items purchased

Answer rating: 100% (QA)

1a Yes It is accounted as change in accounting policy because change in valuation method reflects the actual flow of inventories and hence provides re... View the full answer