Question 1

We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively. Explain when it is appropriate to report the changes prospectively. Provide examples.

Accepted Answer

The answer of We record and report most changes in...

Question 2

Branch Industries changes from declining balance depreciation to straight-line depreciation for existing assets. Describe in detail the way Branch would account for the change and include reasons for the accounting.

Accepted Answer

The answer of Branch Industries changes from declining balance depreciation...

Question 3

What is the difference between U.S. GAAP and IFRS with regard to the correction of accounting errors?

Accepted Answer

The answer of What is the difference between U.S. GAAP...

Question 4

If inventory is understated at the end of 2017 and the error is not discovered, how will net income be affected in 2018?

Accepted Answer

The answer of If inventory is understated at the end...

Question 5

What are the situations deemed to constitute a change in reporting entity? Describe the way changes in reporting entity are reported.

Accepted Answer

The answer of What are the situations deemed to constitute...

Question 6

L Company discovered that a three-year insurance premium payment of $240,000 one year ago was debited to insurance expense.
Required:
1. What action is required? Ignore taxes.
2. What action is required if the error is not discovered until four years after it occurred?

Accepted Answer

The answer of L Company discovered that a three-year insurance...

Question 7

Describe the way we account for an error when that error is discovered in a subsequent reporting period.

Accepted Answer

The answer of Describe the way we account for an...

Question 8

What are the changes in accounting principle that require the prospective approach?

Accepted Answer

The answer of What are the changes in accounting principle...

Question 9

Some inventory errors are described as "self-correcting" in that they have the opposite financial statement effect in the period following the errors, thereby "correcting" the original account balance errors.
Required:
Given this "self-correcting" feature, discuss why these errors should not be ignored and describe the steps needed to correct these errors.

Accepted Answer

The answer of Some inventory errors are described as "self-correcting"...

Question 10

Describe the way we account for a change in estimate. What is the appropriate accounting if we are unable to determine whether a change is a change in estimate or a change in principle?

Accepted Answer

The answer of Describe the way we account for a...

Question 11

Match between columns
                        Premises: Change from FIFO inventory costing to LIFO inventory costing.
Change from LIFO inventory costing to FIFO inventory costing.
Change in the composition of a group of firms reporting on a consolidated basis.
Change to the installment method of accounting for receivables.
Change in actuarial assumptions for a defined benefit pension plan.
Change from sum-of-the-years' digits depreciation to straight-line.
Change from expensing extraordinary repairs erroneously recorded as an expense to capitalizing the expenditures.
Change in the percentage used to determine warranty expense.
Change from reporting postretirement benefits according to the provisions of U.S. GAAP.
Change in the residual value of machinery.

Accepted Answer

The Answer of CPR: Change in principle reported retrospectively and is...

Question 12

Match between columns
                        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.

Accepted Answer