Exam 20: Accounting Changes and Error Corrections

The effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate should be reported

Which of the following concepts or principles relates most directly to reporting accounting changes and errors?

When a firm changed its method of accounting for inventory from LIFO to FIFO in 2011, it decided that the 2011 financial statements should be shown comparatively with the 2010 results. Which of the following statements concerning reporting the change in the retained earnings statement is correct?

Which of the following isnot correct regarding the provisions of IAS No. 8 on accounting changes and error corrections?

Which of the following accounting treatments is proper for a change in reporting entity?

The September 30, 2011, physical inventory of Baxter Corporation appropriately included $3,800 of merchandise purchased on account that was not recorded in purchases until October 2011. What effect will this error have on September 30, 2011, assets, liabilities, retained earnings, and earnings for the year then ended, respectively?

Statement of Financial Accounting Standards No. 154, "Accounting Changes and Error Corrections, requires that voluntary changes in accounting principles be reported retrospectively. The standard recognizes that such retrospective restatement is not always practical. Required:

On January 1, 2008, Carnival Shipping bought a machine for $1,500,000. At that time, this machine had an estimated useful life of six years, with no salvage value. As a result of additional information, Carnival determined on January 1, 2011, that the machine had an estimated useful life of eight years from the date it was acquired, with no salvage value. Accordingly, the appropriate accounting change was made in 2011. How much depreciation expense for this machine should Carnival record for the year ended December 31, 2011, assuming Carnival uses the straight-line method of depreciation?

Lexicon Inc. bought a patent for $600,000 on January 2, 2007, at which time the patent had an estimated useful life of ten years. On February 2, 2011, it was determined that the patent's useful life would expire at the end of 2013. How much would Lexicon record as amortization expense for this patent for the year ending December 31, 2011?

Which of the following is the proper time period in which to record a change in accounting estimate?

BJ Company uses a periodic inventory system. If the company's beginning inventory in the current year is overstated, and that is the only error in the current year, then the company's income for the current year will be

Which of the following does not represent a change in reporting entity?

Biden Corp. reports on a calendar-year basis. Its 2010 and 2011 financial statements contained the following errors: As a result of the above errors, 2011 income would be

A change in the unit depletion rate would be accounted for as a

Wolverine Corporation purchased a machine for $132,000 on January 1, 2008, and depreciated it by the straight-line method using an estimated useful life of eight years with no salvage value. On January 1, 2011, Wolverine determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of $12,000. A change in estimate was made in 2011 to reflect these additional data. What amount should Wolverine record as the balance of the accumulated depreciation account for this machine at December 31, 2011?

Stone Enterprise purchased a machine on January 3, 2008. The machine cost $46,000 with an estimated salvage value of $2,000 and an estimated useful life of 10 years. As a result of technological improvements, a revision of the machine's useful life and estimated salvage value was made. On January 1, 2011, the equipment was estimated to last through 2012 with an estimated value at that time of $500. Stone uses the straight-line method for depreciation. Prepare the journal entry to record depreciation on December 31, 2011.

Which of the following is characteristic of a change in accounting estimate?

Tyson Company bought a machine on January 1, 2009, for $24,000, at which time it had an estimated useful life of eight years, with no residual value. Straight-line depreciation is used for all of Tyson's depreciable assets. On January 1, 2011, the machine's estimated useful life was determined to be only six years from the acquisition date. Accordingly, the appropriate accounting change was made in 2011. Tyson's income tax rate was 40 percent in all the affected years. In Tyson's 2011 financial statements, how much should be reported as the cumulative effect on prior years because of the change in the estimated useful life of the machine?

On December 27, 2011, Johnson Company ordered merchandise for resale from Quantum, Inc., that cost $7,000 (terms cash within 10 days). Quantum shipped the merchandise f.o.b. shipping point on December 28, 2011, and the goods arrived on January 2, 2012. The invoice was received on December 30, 2011. Johnson Company did not record the purchase in 2011 and did not include the goods in ending inventory. The effects on Johnson Company's 2011 financial statements were

Western Company purchased some equipment on January 2, 2008, for $24,000. The company used straight-line depreciation based on a ten-year estimated life with no residual value. During 2011, management decided that this equipment could be used only three more years and then would be replaced with a technologically superior model. What entry should the company make as of January 1, 2011, to reflect this change?