Question

Finer Foods, Inc., a chain of supermarkets specializing in gourmet food, has been using the average cost method to measure its inventory. During the current year, the company changed to the first-in, first-out method of inventory measurement. The president of the company reasoned that this change was appropriate because it would more closely match the flow of physical goods. This change should be reported on the financial statement as a

A. Change in an accounting principle.
B. Correction of an error.
C. Change in an accounting estimate.
D. Cumulative-effect type accounting change.

Answer 1

Answer: (A) Change in an accounting principle

Step-by-step explanation:

According to the given question, the finer food Inc., is one of the company which using the average cost technique for measuring the inventory process.

So, the change made in the company is reported in the form of financial statement as change in an accounting principle of flow of the physical products.

The accounting change is the term which is used for reporting an entity and the estimating and evaluation the various types of asserts and liabilities in an organization.

Therefore, Option (A) is correct answer.