Kettle Creek revises the expected selling price of its syrup from 11 to 10.50 a case after a market survey. How is this change accounted for?

Answer

Prospectively — it is a change in estimate

Options - A. Prospectively — it is a change in estimate - B. Retrospectively — it is a change in accounting policy - C. By restatement — it is an error - D. Retrospectively, but only if the effect is material Why - A. Correct — a revised expectation is a change in estimate; it applies from the date of the change forward, and nothing prior is restated. - B. A policy is a method (FIFO, weighted average); a selling-price expectation is an estimate. Estimates are never retrospective. - C. The earlier price was the best information available at the time; a later, better estimate does not make the earlier one an error. - D. Materiality decides whether an item matters at all, not whether an estimate change becomes retrospective — it never does.

L1 §7.3.2; L2 §21.2; LI §6.1