The net income amounts for Box and Wood, Inc. over a four-year period is as follows:
After further examination of the financial report, you note that Box and Wood, Inc. made accounting method changes in 2008 and 2010, which affected net income in those periods. In 2008, the company changed depreciation methods. This change increased the book value of its fixed assets in each subsequent year by $10,000. In 2010, the company adopted a new inventory method that increased the book value of the inventory by $18,000.
Requirements:
a. Calculate the effect of each of these changes on net income in the year of the change.
b. Prepare a chart that compares net income across the four-year period, assuming that Box and Wood, Inc. made no accounting changes. How would your assessment of the company's performance change after you learned of the accounting method changes?
c. What principle of financial accounting makes it difficult to make such changes? Describe the conditions under which Box and Wood, Inc. would be allowed to make changes in their accounting methods.

Question

The net income amounts for Box and Wood, Inc. over a four-year period is as follows:
  After further examination of the financial report, you note that Box and Wood, Inc. made accounting method changes in 2008 and 2010, which affected net income in those periods. In 2008, the company changed depreciation methods. This change increased the book value of its fixed assets in each subsequent year by $10,000. In 2010, the company adopted a new inventory method that increased the book value of the inventory by $18,000.
Requirements: 
a. Calculate the effect of each of these changes on net income in the year of the change.
b. Prepare a chart that compares net income across the four-year period, assuming that Box and Wood, Inc. made no accounting changes. How would your assessment of the company's performance change after you learned of the accounting method changes?
c. What principle of financial accounting makes it difficult to make such changes? Describe the conditions under which Box and Wood, Inc. would be allowed to make changes in their accounting methods.

Quizplus · Accepted Answer

The Answer of The net income amounts for Box and Wood, Inc. over a four-year period is as follows:
  After further examination of the financial report, you note that Box and Wood, Inc. made accounting method changes in 2008 and 2010, which affected net income in those periods. In 2008, the company changed depreciation methods. This change increased the book value of its fixed assets in each subsequent year by $10,000. In 2010, the company adopted a new inventory method that increased the book value of the inventory by $18,000.
Requirements: 
a. Calculate the effect of each of these changes on net income in the year of the change.
b. Prepare a chart that compares net income across the four-year period, assuming that Box and Wood, Inc. made no accounting changes. How would your assessment of the company's performance change after you learned of the accounting method changes?
c. What principle of financial accounting makes it difficult to make such changes? Describe the conditions under which Box and Wood, Inc. would be allowed to make changes in their accounting methods.

The Net Income Amounts for Box and Wood, Inc