Yee Construction Co.had followed the practice of expensing all materials assigned to a construction job without recognizing any residual inventory.On December 31, 2016, it was determined that residual inventory should be valued at ¥56,000.Of this amount, ¥23,000 arose during the current year.Based on this information, all of the following statements are true regarding the effect on the financial statements to be prepared at the end of 2016 except
A)¥23,000 should be reported in the 2016 statements as a reduction of materials cost.
B)¥33,000 should be reported as an adjustment to the beginning balance of retained earnings in the 2016 financial statements.
C)This change should be handled as a correction of an error.
D)This change should be handled as a change in accounting estimate.

Question

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The Answer of Yee Construction Co.had followed the practice of expensing all materials assigned to a construction job without recognizing any residual inventory.On December 31, 2016, it was determined that residual inventory should be valued at ¥56,000.Of this amount, ¥23,000 arose during the current year.Based on this information, all of the following statements are true regarding the effect on the financial statements to be prepared at the end of 2016 except
A)¥23,000 should be reported in the 2016 statements as a reduction of materials cost.
B)¥33,000 should be reported as an adjustment to the beginning balance of retained earnings in the 2016 financial statements.
C)This change should be handled as a correction of an error.
D)This change should be handled as a change in accounting estimate.