Exam 20: Accounting Changes and Error Corrections

In 2014,a company discovered that $20,000 of equipment purchased on January 1,2011,was expensed in full.The equipment has a ten-year life,no residual value,and should have been depreciated on the straight-line basis.The error is corrected.As a result,the comparative 2013 and 2014 financial statements will show what amounts as adjustments to the beginning balances of retained earnings dated: 1/1/2013 1/1/2014

Baron Co.began operations on January 1,2011,at which time it acquired depreciable assets of $100,000.The assets have an estimated useful life of ten years and no salvage value. In 2014,Baron Co.changed from the sum-of-the-years'-digits depreciation method to the straight-line depreciation method. Required: Determine the depreciation expense for 2014 and prepare the appropriate journal entry.

At the time Hollywood Corporation became a subsidiary of Vine Corporation,Hollywood switched depreciation of its plant assets from the straight-line method to the sum-of-the-years'-digits method used by Vine.With respect to Hollywood,this change was a

A retailing firm changed from LIFO to FIFO in 2014.Inventory valuations for the two methods appear below: Purchases in 2013 and 2014 were $60,000 in each year. -Using the information above,choose the following:

On January 1,2011,Mardi Gras 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,Mardi Gras determined on January 1,2014,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 2014.How much depreciation expense for this machine should Mardi Gras record for the year ended December 31,2014,assuming Mardi Gras uses the straight-line method of depreciation?

Ideally,managers should make accounting changes only as a result of new experience or information,or due to changes in economic conditions that demand methods of accounting that more accurately reflect such changing conditions.Managers should be attempting to achieve the closest match between reporting and economic reality. Identify motivations for managers to make accounting changes other than the goal of achieving congruence between reporting and economic reality.

Crafter,Inc.receives subscription payments for annual (one year)subscriptions to its magazine.Payments are recorded as revenue when received.Amounts received but unearned at the end of each of the last three years are shown below: Crafter failed to record the unearned revenues in each of the three years.As a result of the omission,2014 income was

Songtress Company bought a machine on January 1,2012,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 Songtress' depreciable assets.On January 1,2014,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 2014.Songtress' income tax rate was 40 percent in all the affected years.In Songtress' 2014 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?

Basilia Corporation purchased a machine for $180,000 on January 1,2013.Basilia will depreciate the machine using the straight-line method using a five-year period with no residual value.As a result of an error in its purchasing records,Basilia did not recognize any depreciation for the machine in its 2013 financial statements.Basilia discovered the during the preparation of its 2014 financial statements.What amount should Basilia record for depreciation expense on this machine for 2014?

The correction of an error in the financial statements of a prior period should be reflected,net of applicable income taxes,in the current

Which of the following is not a justification for a change in depreciation methods?

A change from an accelerated depreciation method to the straight-line depreciation method should be accounted for as a

In 2014,a company changed from the FIFO method of accounting for inventory to LIFO.The company's 2013 and 2014 comparative financial statements will reflect which method or methods? 2013 2014

Witherfork Company was recently acquired by a new owner who has decided to correct the prior accounting records during the current reporting period ending December 31,2014.The accounts have been partially adjusted but have not been closed for 2014.The following items have been discovered: Required: Provide the appropriate entry to record any change or correction and give any adjusting entry needed in each instance at the end of 2014.Show computations for entries made,and provide explanations for situations for which no entry is required.

Which of the following would NOT be accounted for as a change in accounting principle?

Chiclet Company decides at the beginning of 2014 to adopt the FIFO method of inventory valuation.The company had been using the LIFO method for financial and tax reporting since it inception on January 1,2012.The profit-sharing agreement was in place for all years prior to the year of change,2014.Payments under this agreement are not an inventoriable cost. Which of the following statements regarding the accounting for the profit-sharing agreement in connection with the change from LIFO to FIFO is correct?

FASB ASC Topic 250 (Presentation-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:

Which of the following is not correct regarding the provisions of IAS No.8 on accounting changes and error corrections?

Which of the following would cause income of the current period to be understated?

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