a. Quo manufactures heavy equipment to customer specifications on a contract basis. Duc to the issuance of a new Accounting Standard Update, it switched the accounting method for these long-term contracts because the former method is no longer acceptable. Copyright 2000 Cengage Leuning. All Rights Reservod. May be copiod, samod, or daplicted, in whede ot in purt. Due o electnonie rights, me thind party content may be suppresed from the cBoek andive Chupterts). Edtreial review has deemed that any wappressed content does net mterially affect the overall learming esperience. Cenpope Leaming reerves the right tn remove additimal coetent a any time if abapani rigtes restricticen nequire it. Problems 22-35 b. As a result of a production breakthrough, Quo determined that manufacturing cquipment previously depre- ciated over 15 years should be depreciated over 20 years. c. The equipment that Quo manufactures is sold with a 5-ycar warranty. Because of a production breakthrough, Quo reduced its computation of warranty costs from 3% of sales to 1% of sales. d. Quo changed from LIFO to FIFO to account for its finished goods inventory. c. Quo sells extended service contracts on its products. Because related services are performed over several years, in 2019, Quo changed from the cash method to the accrual method of recognizing income from these service contracts. f. During 2019, Quo determined that an insurance premium paid and entirely expensed in 2018 was for the period January 1, 2018, through January 1, 2020. g. Quo changed its method of depreciating office equipment from an accelerated method to the straight-line method to more closely reflect the pattern of benefits. h. Quo instituted a pension plan for all employees in 2019 and adopted GAAP. Quo had not previously had a pension plan. i. During 2019, Quo increased its investment in Worth Inc. from a 10% interest, purchased in 2018, to 60%. As a result of its increased investment, Quo changed its method of accounting for investment in subsidiary from the fair value method to the consolidation method.

a. Quo manufactures heavy equipment to customer specifications on a contract basis. Duc to the issuance of a new Accounting Standard Update, it switched the accounting method for these long-term contracts because the former method is no longer acceptable. Copyright 2000 Cengage Leuning. All Rights Reservod. May be copiod, samod, or daplicted, in whede ot in purt. Due o electnonie rights, me thind party content may be suppresed from the cBoek andive Chupterts). Edtreial review has deemed that any wappressed content does net mterially affect the overall learming esperience. Cenpope Leaming reerves the right tn remove additimal coetent a any time if abapani rigtes restricticen nequire it. Problems 22-35 b. As a result of a production breakthrough, Quo determined that manufacturing cquipment previously depre- ciated over 15 years should be depreciated over 20 years. c. The equipment that Quo manufactures is sold with a 5-ycar warranty. Because of a production breakthrough, Quo reduced its computation of warranty costs from 3% of sales to 1% of sales. d. Quo changed from LIFO to FIFO to account for its finished goods inventory. c. Quo sells extended service contracts on its products. Because related services are performed over several years, in 2019, Quo changed from the cash method to the accrual method of recognizing income from these service contracts. f. During 2019, Quo determined that an insurance premium paid and entirely expensed in 2018 was for the period January 1, 2018, through January 1, 2020. g. Quo changed its method of depreciating office equipment from an accelerated method to the straight-line method to more closely reflect the pattern of benefits. h. Quo instituted a pension plan for all employees in 2019 and adopted GAAP. Quo had not previously had a pension plan. i. During 2019, Quo increased its investment in Worth Inc. from a 10% interest, purchased in 2018, to 60%. As a result of its increased investment, Quo changed its method of accounting for investment in subsidiary from the fair value method to the consolidation method.

Business Its Legal Ethical & Global Environment

10th Edition

ISBN:9781305224414

Author:JENNINGS

Publisher:JENNINGS

Chapter12: Contracts And Sales:introduction And Formation

Section: Chapter Questions

Problem 5QAP

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