If a company has discontinued operations, depreciation must still be taken on the assets held for sale. True False
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1 If a company has discontinued operations,
True | |
False |
2 The fiscal year-end that a company chooses will likely be influenced most by the company's business cycle.
True | |
False |
3 The accounting treatment for an error or omission is a retrospective adjustment with restatement.
True | |
False |
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- TRUE OR FALSE 1. If beginning inventory of prior year is understated, retained earnings is understated. 2. The change in depreciation method is a change in accounting policy. 3. If ending inventory of prior year is overstated, retained earnings is understated 4. The change in accounting estimate should be treated currently and prospectively.Change in Accounting Policy, Change in Estimate, Correction of Error For each of the following situations, identify whether the situation should be considered a change in estimate, change in policy, or correction of an error. Identify also whether the required adjustment should be made retrospectively or prospectively. 1. The benefits received from a piece of equipment were determined to be different than originally anticipated, so the company changed from straight-line depreciation to double- declining balance. 2. In the past, the company used the cash basis of accounting, but this year is switching to the accrual basis of accounting. 3. The company decided that using the average cost method to value inventory would be reliable and more relevant than the FIFO method currently used. 4. The anticipated residual value of a piece of equipment was deemed to be not as large as originally estimated.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.
- 6-An audit of an entity records for its first year of operations determined that the following errors were made at the balance sheet date. Failed to accrue 50000 interest expenses failed to record depreciation expense on office equipment of 80000 failed to amortize prepaid rent expense of 100000 failed to defer recognition of prepaid advertising expense of 60000. The net effect of these errors was to overstate net profit by A. 130000 B. 170000 C. 230000 D. 290000When a company changes from the straight-line method of depreciation for previously recorded assets to the double declining balance method, which of the following should be reported?Cumulative effects of change in accounting principle, Pro forma effects of retroactive applicationa. No Nob. No Yesc. Yes Yesd. Yes NoThe Accountant for the a Company forgot to make an adjusting entry to record depreciation for the current year. The effect of this error would be: a An overstatement of net income and an understatement of assets. b An overstatement of assets offset by an understatement of owners' equity. c An overstatement of assets, net income, and owners' equity. d An overstatement of assets and of net income and an understatement of owners' equity.
- Case 1: Accounting ChangesIt is important in accounting theory to be able to distinguish the types of accountingchanges:Required:a) If a public company desires to change from the sum-of-year’s-digits depreciationmethod to the straight-line method for its fixed assets, what type of accountingchange will this be? How would it be treated? Discuss the permissibility of thischange.b) If a public company obtained additional information about the service lives ofsome of its fixed assets that showed that the service lives previously used shouldbe shortened, what type of accounting change would this be? Include in yourdiscussion how the change should be reported in the income statement of theyear of the change and what disclosures should be made in the financialstatements or notes.QUESTION 5 If new equipment purchased during the year is reported on the balance sheet at December 31 as a long-term asset, there will be no related item on the income statement for the year ended December 31. True FalseCase 3: Identifying Accounting ChangesSometimes a business entity may change its method of accounting for certain items.The change may be classified as a change in accounting principle, a change inaccounting estimate, or a change in reporting entity. Listed below are twoindependent, unrelated sets of facts relating to accounting changes.Situation 1:A company determined that the depreciable lives of its fixed assets were presentlytoo long to fairly match the cost of the fixed assets with the revenue produced. Thecompany decided at the beginning of the current year to reduce the depreciable livesof all its existing fixed assets by five years.Situation 2:A company decides in January 2011 to adopt the straight-line method of depreciationfor plant equipment. This method will be used for new acquisitions as well as forpreviously acquired plant equipment for which depreciation had been provided onan accelerated basis.Required:For each of the preceding situations, provide the information…
- True or false: During the closing process, when we reset the balance of the revenue and expense accounts to zero, the overall amount credited (or debited) to retained earnings is equal to the company's net income (or loss) for the fiscal period. If your answer is “False”, then explain (in one sentence) why the statement is false.Identify if the following changes are an accounting policy change (P), an accounting estimate change (AE), or an error (E). Item • The useful life of a piece of equipment was revised from five years to six years. • An accrued litigation liability was adjusted upwards once the lawsuit was concluded. • An item was missed in the year-end inventory count. • The method used to depreciate a factory machine was changed from straight-line to declining balance when it was determined that this better reflected the pattern of use. • A company adopted the new IFRS for revenue recognition. • The accrued pension liability was adjusted downwards as the company's actuary had not included one employee group when estimating the remaining service life. • The allowance for doubtful accounts was adjusted upwards due to current economic conditions. • The allowance for doubtful accounts was adjusted downwards because the previous estimate was based on an aged trial balance that classified some…Please no written by hand solutions Can someone please explain these two questions? 1. Which of the following statements is false? A) An expense is a cost incurred to generate revenues. B) Revenues result in an increase in net income and additional paid-in capital. C) Revenues are reported on the income statement as they are earned. D) Incurring an expense occurs with a decrease in assets or an increase in liabilities. 2. Kronic Ltd. sold inventory costing Kronic $500 for $900 on account. Provide the journal entries required at the time of sale.