Exam 22: Accounting Corrections and Error Analysis

If the first payment on a lease is due at the lease's inception,which compound interest table should be used to determine the amount at which the lease should be recorded?

In a statement of cash flows,the cash flows from investing activities section should report ________. A)the factoring of accounts receivable B)a major overhaul of equipment C)stock dividends received D)the issuance of common stock in exchange for a factory building

Butler Products decided in 2016 to change inventory methods to more effectively report its results of operations.In the past,management has measured its ending inventories by the average-cost method and they now believe that FIFO is a better representation of its profitability. Ignoring income tax,which one of the following journal entries correctly records the change in the accounting principle at January 1,2016?

A self-correcting error must self-correct within two years.

On January 1 of the current year,Fields Corporation leased a machine from Kilmer Company.The machine originally cost Kilmer $450,000.The lease is an operating lease that requires for five annual payments of $54,000 beginning on January 1 of the current year.Which of the following journal entries should Kilmer record on January 1 of the current year? A) B) C) D)

When a company makes a change in an accounting principle,IFRS additionally requires a company to report ________.

Woods,Inc.purchased a new engine for a long-distance truck in January,2015.The engine cost $200,000 and should give the truck an additional 400,000 miles of life.Inadvertently,the engine was charged to truck repairs expense.The error was found in December,2016.The company records depreciation based on miles driven with no salvage value.Miles driven in 2015 were 80,000 and 70,000 in 2016.Which one of the following entries properly corrects all the errors thru December 31,2016? (Ignore income taxes.)

Which of the following is not a required section of the cash flow statement?

Under IFRS,the operating activities section may begin with something other than net income when using the indirect method.

For each of the following situations,determine the type of change and the accounting method that should be employed. Complete the following table by selecting the appropriate type of changes and the accounting method appropriate for each event.

If a lease transaction is in essence a purchase of an asset with the issuance of debt,then the lessee records both the asset and the liability on the balance sheet.

Hampton's Construction,Inc.decided to change from completed-contract method of accounting to percentage-of-completion method.The following information is available for net income.Ignore income tax effects: What is the journal entry to record the change in accounting principle on January 1,2016?

Which of the following is true if a lease includes both a bargain purchase option and a residual value?

On January 1,Teague Company leased office equipment from Sprague Corporation.The lease qualifies as an operating lease.The term is three years and calls for semiannual payments of $25,000 each,payable on June 30 and December 31 of each year.Sprague acquired the machines at a cost of $150,000 on January 1 of the current year.The expected life is five years with no residual value expected. Required: 1.Prepare the appropriate journal entries for the lessee for the first year. 2.Show how the lessor would disclose this lease on the face of the balance sheet for December 31 of the current year.

A lease is classified as a capital lease if the minimum lease payments is at least 75% of the fair market value of the property at the inception of the lease.

At the end of a lease,if the actual residual value exceeds the residual value guaranteed by the lessee,________. A)the lessor must compensate the lessee for the difference B)the lessee must compensate the lessor for the difference C)the lessor has no obligation to compensate the lessee for the excess D)the lessee will record miscellaneous income

When preparing the statement of cash flows using the indirect method,which of the following is subtracted from net income to determine cash flows from operations?

When there is a bargain purchase option,the leased asset will be depreciated over the life of the lease instead of the life of the asset.

The basis for the statement of cash flows that is recommended by IFRS is actually "cash and cash equivalents."

Which of the following costs are excluded from a minimum lease payment?