Matching
Match disclosures to situations.In the blank to the left of each question, fill in the letter from the following list which best describes the presentation of the item on the financial statements of Helton Corporation for 2015.
Premises:
Depreciation on a truck, acquired in 2012, was understated because the service life had been overestimated. The understatement had been made in order to show higher net income in 2013 and 2014.
In 2015, the company changed its method of depreciating plant assets from the double-declining balance method to the straight-line method.
During 2015, a long-term bond with a carrying value of $3,600,000 was retired at a cost of $4,100,000.
After negotiations with the IRS, income taxes for 2013 were established at $42,900. They were originally estimated to be $28,600.
In the current year, the company decides to change from expensing certain costs to capitalizing these costs, due to a change in the period benefited.
At the end of 2015, an audit revealed that the corporation's allowance for doubtful accounts was too large and should be reduced to 2%. When the audit was made in 2014, the allowance seemed appropriate.
In computing the depreciation in 2013 for equipment, an error was made which overstated income in that year $75,000. The error was discovered in 2015.
In 2015, the company incurred interest expense of $29,000 on a 20-year bond issue.
The company switched from a LIFO to a FIFO inventory valuation method during the current year.
In 2015, the company changed its method of recognizing income from the completed-contract method to the percentage-of-completion method.
Responses:
Retrospective type accounting change with note disclosure
Prior period adjustment (not due to change in principle)
None of the above
Change in estimate
Correct Answer:
Premises:
Responses:
Depreciation on a truck, acquired in 2012, was understated because the service life had been overestimated. The understatement had been made in order to show higher net income in 2013 and 2014.
In 2015, the company changed its method of depreciating plant assets from the double-declining balance method to the straight-line method.
During 2015, a long-term bond with a carrying value of $3,600,000 was retired at a cost of $4,100,000.
After negotiations with the IRS, income taxes for 2013 were established at $42,900. They were originally estimated to be $28,600.
In the current year, the company decides to change from expensing certain costs to capitalizing these costs, due to a change in the period benefited.
At the end of 2015, an audit revealed that the corporation's allowance for doubtful accounts was too large and should be reduced to 2%. When the audit was made in 2014, the allowance seemed appropriate.
In computing the depreciation in 2013 for equipment, an error was made which overstated income in that year $75,000. The error was discovered in 2015.
In 2015, the company incurred interest expense of $29,000 on a 20-year bond issue.
The company switched from a LIFO to a FIFO inventory valuation method during the current year.
In 2015, the company changed its method of recognizing income from the completed-contract method to the percentage-of-completion method.
Premises:
Depreciation on a truck, acquired in 2012, was understated because the service life had been overestimated. The understatement had been made in order to show higher net income in 2013 and 2014.
In 2015, the company changed its method of depreciating plant assets from the double-declining balance method to the straight-line method.
During 2015, a long-term bond with a carrying value of $3,600,000 was retired at a cost of $4,100,000.
After negotiations with the IRS, income taxes for 2013 were established at $42,900. They were originally estimated to be $28,600.
In the current year, the company decides to change from expensing certain costs to capitalizing these costs, due to a change in the period benefited.
At the end of 2015, an audit revealed that the corporation's allowance for doubtful accounts was too large and should be reduced to 2%. When the audit was made in 2014, the allowance seemed appropriate.
In computing the depreciation in 2013 for equipment, an error was made which overstated income in that year $75,000. The error was discovered in 2015.
In 2015, the company incurred interest expense of $29,000 on a 20-year bond issue.
The company switched from a LIFO to a FIFO inventory valuation method during the current year.
In 2015, the company changed its method of recognizing income from the completed-contract method to the percentage-of-completion method.
Responses:
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