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Indicate the Nature of Each of the Following Situations

Question 152

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Indicate the nature of each of the following situations:

Premises:

Responses:

Technological advance that renders worthless a patent with an unamortized cost of $45,000.

CPR: Change in principle reported retrospectively

Change from LIFO inventory costing to average inventory costing.

CPP: Change in principle reported prospectively

Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years.

CES: Change in estimate

Change from FIFO inventory method to LIFO.

CRE: Change in reporting entity

Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.

PPA: Prior period adjustment required

Change from the pay-as-you-go method to estimating warranty expense in the period the related product is sold.

Change from declining balance depreciation to straight-line.

Change from determining lower of cost or net realizable value for inventories by the individual item approach to the aggregate approach.

Settling a lawsuit for less than the amount accrued previously as a loss contingency.

Change in the estimated useful life of office equipment.

Premises:

Technological advance that renders worthless a patent with an unamortized cost of $45,000.

Change from LIFO inventory costing to average inventory costing.

Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years.

Change from FIFO inventory method to LIFO.

Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.

Change from the pay-as-you-go method to estimating warranty expense in the period the related product is sold.

Change from declining balance depreciation to straight-line.

Change from determining lower of cost or net realizable value for inventories by the individual item approach to the aggregate approach.

Settling a lawsuit for less than the amount accrued previously as a loss contingency.

Change in the estimated useful life of office equipment.

Responses:

CPR: Change in principle reported retrospectively

CPP: Change in principle reported prospectively

CES: Change in estimate

CRE: Change in reporting entity

PPA: Prior period adjustment required

Correct Answer:

Premises:

Responses:

Technological advance that renders worthless a patent with an unamortized cost of $45,000.

Change from LIFO inventory costing to average inventory costing.

Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years.

Change from FIFO inventory method to LIFO.

Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.

Change from the pay-as-you-go method to estimating warranty expense in the period the related product is sold.

Change from declining balance depreciation to straight-line.

Change from determining lower of cost or net realizable value for inventories by the individual item approach to the aggregate approach.

Settling a lawsuit for less than the amount accrued previously as a loss contingency.

Change in the estimated useful life of office equipment.