Answered: A company made a material error in…

A company made a material error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 4MC: A change in the expected service life of an asset arising because additional information has been...

See similar textbooks

Related questions

Q: Changes in amortization method, useful life, and residual value are changes in accounting estimates…

A: Changes in accounting estimates include: Changes in the useful life of assets Changes in the…

Q: How should material seasonal variations in revenue be reflected in interim financial statements?a.…

A: Material seasonal variations in revenue occurs due to seasonal availability of materials and the…

Q: Based on the preceding information, compute the following: 1. What is the revaluation surplus…

A: Given that: Original cost = P100,000 Life = 10 years

Q: The following statements relate to the depreciation of property, plant and equipment. Which…

A: Lets start with basic understanding. Depreciation is a reduction in value of asset due to wear and…

Q: Which of the following is not a counterbalancing error? Non-recognition of the unused portion of…

A: Counterbalancing errors are those errors which will counter balance automatically in the next year.…

Q: A company fails to capitalize avoidable interest incurred while constructing an asset. What is the…

A: The interest expense incurred for construction of an asset should be capitalized because a new fixed…

Q: Choose the correct. How should material seasonal variations in revenue be reflected in interim…

A: Variance: Variance refers to the difference level in the actual cost incurred and standard cost.…

Q: Which of the following events could not coincide with the recognition of an expense? O The…

A: Expenses means the amount spent on running the business. Expense will decrease our profits and shown…

Q: 1. An entity made a very large arithmetical error in the calculation of depreciation. The correction…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: In year 2022, collection of interest income is credited to Interest Expense. What is the effect of…

A: >When recording a financial transaction relating to revenues and expenses, following treatments…

Q: A change from the straight-line method of depreciation to sum-of-years' digits is accounted for as…

A: Change in accounting estimate relates with an estimates for doubtful allowance, estimate for…

Q: Which of the following would have an effect on the presentation of past years' comparable financial…

A: Financial Statement- Financial statements contain information about an entity's financial activity…

Q: The correction of a material error discovered in a year subsequent to the year the error was made is…

A: Accounting error:

Q: Which of the following statements related to long-lived assets is true? Depreciation is…

A: Depreciation : Depreciation is an accounting method of allocating the cost of a tangible or…

Q: There are various types of accounting changes, each of which is required to be reported…

A: Depreciation: Depreciation refers to the reduction in the monetary value of a fixed asset due to its…

Q: - Instruction: Fill in the blank on the type/nature of the adjustment or the pro-forma entry of the…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: What is the effect of omission of accrued income in assets at the end of the year of error? a.…

A: Accrued income: Increases assets Increases Owners' equity

Q: There are various types of accounting changes, each of which is required to be reported differently.…

A: 1.A change from the sum-of-the-years’-digit method of depreciation to straight line method, creates…

Q: oing err

A: Errors can be of different types in accounting such as Error of ommission, error of commission,…

Q: By how much would the December 31, 2021 retained earnings be misstated if no adjustments were made…

A: Note: Only 39 & 40 have been answered as required. 39. 2007 Items 1 and 2 will self-correct in…

Q: When a company changes from the straight-line method of depreciation for previously recorded assets…

A: A change in depreciation method is indistinguishable from a change in estimate and is treated as…

Q: Which of the following is not a type of adjusting entry? a. Depreciation of long-term physical…

A: In accounting, adjusting entries are journal entries usually made at the end of an accounting period…

Q: The omission of an adjusting entry for the depreciation of equipment will have what effect on the…

A: Depreciation represents the reduction in the value of the long term asset over a useful period of…

Q: By how much would the December 31, 2021 retained earnings be misstated if no adjustments were made…

A: Year Reference Account Name Debit (P) Credit (P) Overstated/(Understated) retained earnings 2020…

Q: Which of the following is not a counterbalancing error? O Omission of accrued interest expense at…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Indicate how prior period adjustments should be reported on the financial statements presented only…

A: Prior Period Adjustments Prior period adjustments refer to the error that is caused due to any…

Q: Depreciation for a prior period was incorrectly understated by $950,000. The error was discovered in…

A: Income Statement: - Income Statement focuses on revenues and expenses of the company during a…

Q: Which of the following is not a required disclosure regarding intangible assets that are amortized…

A: Depreciation means the loss in value of assets because of usage of assets , passage of time or…

Q: The results of the discontinued operation should be reported net of tax as A. A prior period…

A: A discontinued operation is a material division or department of the entity held for sale. The…

Q: Which of the following is accounted for as a change in accounting policy? A. A change in the…

A: Change in Accounting Policy means switching from one typebod GAAp method to another Type of GAAP…

Q: What is the effect of omission of accrued expenses in assets at the end of the year of error? Group…

A: The correct option with proper explanation are as follows

Q: A company has decided to change its depreciation method to better reflect the pattern of use of its…

A: As per Generally accepted accounting principles, using an appropriate method for applying…

Q: If a P2,500 adjustment for depreciation is omitted, which of the following financial statement…

Q: Which of the following is most likely not considered an adjusting entry? a. The accrual of an…

A: Solution: "The entry to record the collection of interest receivable" is most likely not considered…

Q: ous period’s financial statements are called?

A: It is common to occur errors in the financial statements, but whenever it is found that errors have…

Q: What is the effect of omission of accrued expenses in assets at the end of the year of error? O No…

A: Accrued expenses are expenses that are recognised in the books of accounts before they have been…

Q: If it is discovered that an extraordinary repair in the previous year was incorrectly debited to…

Q: tate the effect of the following errors if OVERSTATED, UNDERSTATED, or NO EFFECT. NO. ERRORS EFFECT…

A: Solution Concept Retained earnings is understated if net income is understated Retained earnings is…

Q: What is the effect of omission of accrued income in net income during the year of error? O…

A: Net income means the amount of profit earned after deducting all expenses from the revenue of the…

Q: What is the effect of omission of accrued income in assets at the end of the year of error? O NO…

A: A basic Accounting equation is given as under; Assets = Equity + Liabilities Meaning, Total…

Q: How should accounting errors discovered in the same accounting period they relate be correct. For…

A: Following is the answer to the given question.

Q: A company wishes to report the highest earnings possibleaccording to GAAP. Therefore, when…

A: Depreciation: It refers to a gradual decrease in the fixed asset’s value because of obsolescence,…

Q: The amount of asset cost assigned as an expense to a particular period is called: a. Depreciation b.…

A: Introduction: Income statement: All revenues and expenses are shown in Income statement. It tells…

Q: Which of the following is most likely not considered an adjusting entry? The accrual of an…

A: The adjustment entries are prepared at year end to adjust the revenue and expenses of the current…

Q: What is the effect of omission of prepaid expense in net income during the year of error? a.…

A: Prepaid expenses should be deducted from the particular expense to which it relates in the…

Q: An example of a correction of an error is a change: a. From FIFO inventory valuation to the average…

A: Accounting:- Accounting is defined as the process of recording, summarizing, interpreting and…

Q: What is the effect of omission of accrued expenses in expenses during year 2 after the year of…

A: Answer) The correct Option is UNDERSTATED Justifications: If the accrued expenses for year 1 are not…

Q: Per PAS 8, it is an adjustment of the carrying amount of an asset or a liability., or the amount of…

A: As per PAS 8, "A change in accounting estimate is an adjustment of the carrying amount of an asset…

Question

A company made a material error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be
reported as a prior period adjustment:

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

An example of an item that should be reported as a prior-period adjustment in a company’s annual financial statements is a. a settlement resulting from litigation. b. an adjustment of income taxes. c. a correction of an error that occurred in a prior period. d. an adjustment of utility revenue because of rate revisions ordered by a regulatory commission.
The correction of a material error discovered in a year subsequent to the year the error was made is considered a prior period adjustment. Briefly describe the accounting treatment for prior period adjustments.
Under U.S. GAAP, in a year in which the fair value of an asset rises, should a company record depreciation expense for that asset? Why?
A change in the expected service life of an asset arising because additional information has been obtained is: a. an accounting change that should be reported by restating the financial statements of all prior periods represented b. an accounting change that should be reported in the period of change and future periods if the change affects both c. a correction of an error d. not an accounting change
An example of a correction of an error is a change: a. From FIFO inventory valuation to the average method b. In the service life of property, plant and equipment c. From cash basis to accrual basis of accounting d. In the tax assessment related to a prior period
What is the effect of omission of accrued expenses in assets at the end of the year of error? a. Understated b. No effect c. Overstated d. Cannot be determined from the given information
Which of the following are examples of changes in the gross carrying amount of financial instruments (PFRS 7) that contributed to the changes in the loss allowance? * Changes because of financial instruments originated or acquired during the reporting period The modification of contractual cash flows on financial assets that do not result in a derecognition of those financial assets in accordance with IFRS 9 Changes because of financial instruments that were derecognised (including those that were written-off) during the reporting period Changes arising from whether the loss allowance is measured at an amount equal to 12-month or lifetime expected credit losses
According to IAS 8, how should prior period errors that are discovered in a subsequent reporting period be recognized in the financial statements? a. As an adjustment to beginning retained earnings for the reporting period in which the error was discovered. b. As a note in the financial statements that the error was previously made but has since been corrected. c. In the statement of comprehensive income. d. Retroactively for all periods presented.
If the income statement error is discovered in a subsequent accounting period, what action is to be done by the entity? Group of answer choices a. Reclassify the item to its proper nominal account and restate the income statement of the prior year affected by the error. b. Restate the income statement of the prior year affected by the error. c. No reclassifying entry is necessary but restate the income statement of the prior year affected by the error. d. Reclassify the item to its proper nominal account. Recording of next year's sales as sales of the current year will Group of answer choices a. overstate net income of next year b. not affect retained earnings at the end of next year c. understate retained earnings at the end of the current year d. understate net income of the current year
A company fails to capitalize avoidable interest incurred while constructing an asset. What is the effect on net income in the current year and net income in subsequent years (when the asset is depreciated).
What is the effect of omission of accrued income in assets at the end of the year of error? a. Understated b. Overstated c. Cannot be determined from the given information d. NO effect
1. An entity made a very large arithmetical error in the calculation of depreciation. The correction of the error when discovered in the next year should be treated as Choices; A prior period adjustment Other expense for the year when the error was made. An increase in depreciation expense for the year when the error is discovered. A component of income for the year when the error is discovered but separately reported. 2. Items directly affecting Retained Earnings include all of the following Except Choices; Non-Current asset held for sale Prior period errors and Effect of change in accounting policy. Dividends declared Appropriation of retained earnings