Retail inventory method It takes into account all the retail amounts that is, the current selling prices. Under this method, the goods available for sale, at retail is deducted from the sales, at retail to determine the ending inventory, at retail. Average cost method Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period. To Explain: the reason for GAAP (Generally Accepted Accounting Principles) requiring Company A to retroactively adjust all prior periods for this type of accounting change.

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Chapter 9, Problem 9.7BYP

To determine

Retail inventory method

It takes into account all the retail amounts that is, the current selling prices. Under this method, the goods available for sale, at retail is deducted from the sales, at retail to determine the ending inventory, at retail.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Explain: the reason for GAAP (Generally Accepted Accounting Principles) requiring Company A to retroactively adjust all prior periods for this type of accounting change.

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