Changes in Accounting Principles

Explanation

Both I and III involve changes in the method of accounting.

The correct answer is B. I, II, and III.

Let's go through each option and explain whether it represents a change in accounting principle or not:

I. A change from LIFO (Last-In, First-Out) to FIFO (First-In, First-Out): This represents a change in accounting principle. LIFO and FIFO are two different inventory valuation methods, and switching from one to the other is considered a change in accounting principle. Therefore, option I is a change in accounting principle.

II. A change in estimated salvage value of a depreciable asset: This does not represent a change in accounting principle. The estimated salvage value of a depreciable asset is part of the calculation used to determine depreciation expense. Changing the estimated salvage value does not involve a change in the underlying accounting principle used to record the asset or its depreciation. Therefore, option II is not a change in accounting principle.

III. A change from an accelerated depreciation method to straight-line depreciation: This represents a change in accounting principle. Accelerated depreciation methods, such as the double-declining balance method or the sum-of-the-years' digits method, allocate higher depreciation expenses in the earlier years of an asset's useful life. Switching to straight-line depreciation, where depreciation expense is allocated evenly over the asset's useful life, represents a change in accounting principle. Therefore, option III is a change in accounting principle.

IV. Recording depreciation for the first time on machinery purchased five years ago: This does not represent a change in accounting principle. While it may involve a change in the accounting treatment of the machinery, it does not involve a change in the fundamental accounting principle used to record depreciation. It simply means that depreciation was not recorded previously and is now being recognized. Therefore, option IV is not a change in accounting principle.

Based on the explanations above, the correct answer is B. I, II, and III, as options I, II, and III represent changes in accounting principle.