Classify each of the following accounting practices as conservative or aggressive. 1. Increase the allowance for uncollectible accounts. 2. When costs are rising, change from LIFO to FIFO. 3. Change from declining-balance to straight-line depreciation in the second year of an asset depreciated over 20 years.

Classify each of the following accounting practices as conservative or aggressive. 1. Increase the allowance for uncollectible accounts. 2. When costs are rising, change from LIFO to FIFO. 3. Change from declining-balance to straight-line depreciation in the second year of an asset depreciated over 20 years.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter14: Corporation Accounting

Section: Chapter Questions

Problem 18EA: Roxannes Delightful Candies, Inc. began the year with a retained earnings balance of $45,000. The...

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Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. B. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. C. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax. D. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.
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) Which one of these changes would be classified as ‘a change in accounting policy’ as determinedby HKAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’?A Increased the allowance for irrecoverable receivables from 5% to 10% of outstanding debtsB Changed the method of valuing inventory from FIFO to average costC Changed the depreciation of plant and equipment from straight-line depreciation toreducing balance depreciationD Changed the useful economic life of its motor vehicles from six years to four years
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