Exam 22: Accounting Corrections and Error Analysis

Cash flows from investing activities include receipts of cash from the sale of investments and from issuing bonds.

Material error corrections are retrospectively applied but do not require disclosures for changes in retained earnings as prior-period adjustments.

On January 1 of the current year,Jenkins Company signed a 6-year lease for equipment having a 9-year economic life.The present value of the monthly lease payments equaled 75% of the fair value of the equipment.No bargain purchase option or transfer of title was included.How will this lease be reflected on Jenkins' current year income statement?

If a capital lease has a guaranteed residual value,how should the lessee account for it at the inception of the lease?

Emma's Clothes,Inc.has accounts receivable of $210,000.In the current economy,she has noticed an increase in uncollectible accounts.In 2016,her sales were $3,200,000 and in 2017,sales were $3,800,000.She has estimated in the past that 2% of sales would eventually be uncollectible.Emma believes that her losses were closer to 3% last year.What should be the bad debt expense for 2016 and 2017 in the comparative income statements for 2016 and 2017?

Under U.S.GAAP,the lessor disclosure requirements include total future minimum lease payments for all operating leases.

What disclosures must a lessee include on its financial statements for all leases to which it has entered?

The amount of minimum lease payments includes executory costs required to be paid by the lessee.

Prior years financial statement are affected by changes in material accounting estimates.

IFRS,but not U.S.GAAP,requires that companies disclose any cash balances that are held but not available for use.

For an operating lease,the lessor maintains the leased asset on its balance sheet and records depreciation expense each period unless the asset is fully depreciated.

Contrast the differences between the indirect method and the direct by explaining each?

Accounting changes are only permitted when ________.

Cash receipts from collection notes receivable are classified as investing activities.

Explain how treatment of gains and losses on deferred tax assets and liabilities differ between the indirect and direct methods.

Braun Corp.purchased a service vehicle liability policy in July,2015 and paid a five-year premium for $300,000.It was recorded as Insurance Expense.The error was discovered in early 2018 when the accountants were reconciling 2017 for adjusting entries.What is the proper entry to correct the errors if the tax rate for all years is 40%?

Which of the following includes cash flows that relate to the production and delivery of goods and services?

For a lease to be classified as a capital lease,the lease term must be greater than or equal to ________.

Lessee accounting for a capital lease records lease expense and amortization expense.

Which of the following items would not be reported in the financing activities section of the statement of cash flows? A)payment of dividends B)receipt from note receivable C)resale of treasury stock D)retirement of bonds payable