ines are recognized in the interim period in which the decline occurs. Recoveries of such losses on the same inventory in later interim period should be recognized as gains in the interim periods where the decline occurred A. Only statement 1 is true B. Only statement 2 is true C. Both statements are false D. Both statements are true

ines are recognized in the interim period in which the decline occurs. Recoveries of such losses on the same inventory in later interim period should be recognized as gains in the interim periods where the decline occurred A. Only statement 1 is true B. Only statement 2 is true C. Both statements are false D. Both statements are true

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 27CYBK

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Statement 1 : Expenses associated directly with revenue are matched against revenue in those interim periods in which the related revenue is recognized. Statement 2 : Inventory losses from permanent market declines are recognized in the interim period in which the decline occurs. Recoveries of such losses on the same inventory in later interim period should be recognized as gains in the interim periods where the decline occurred. Only statement 1 is true Only statement 2 is true Both statements are false Both statements are true
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
Do you agree with the following statements? Express your opinion on each statement. An inventory error that causes an understatement (or overstatement) for net income in one accounting period, if not corrected, will cause an overstatement (or understatement) in the next. Since an understatement (overstatement) of one period offsets the overstatement (understatement) in the next, such errors are said to correct themselves. Market usually means replacement cost of inventory when applied in the LCM. Cost of goods available for sale equals ending inventory plus cost of sales.
Do you agree with the following statements? Express your opinion on each statement. An inventory error that causes an understatement (or overstatement) for net income in one accounting period, if not corrected, will cause an overstatement (or understatement) in the next. Since an understatement (overstatement) of one period offsets the overstatement (understatement) in the next, such errors as said to correct themselves. Market usually means replacement cost of inventory when applied in the LMC. Cost of goods available for sale equals the inventory plus cost of sales.
If ending inventory of prior year is overstated, retained earnings is understated
The three types of accounting changes, including error correction, are: Code Change in accounting policy. Change in accounting estimate. Error correction. Required: Following are a series of situations. You are to enter a code letter to the left to indicate the type of change. _____ 1. Change due to understatement of inventory. _____ 2. Change due to charging a new asset directly to an expense account. _____ 3. Change from expensing to capitalizing certain costs, due to a change in periods benefited. _____ 4. Change from FIFO to average-cost inventory procedures. _____ 5. Change due to failure to recognize an accrued (uncollected) revenue. _____ 6. Change in amortization period for an intangible asset. _____ 7. Change in expected recovery of an account receivable. _____ 8. Change in the loss rate on warranty costs. _____ 9. Change due to failure to recognize and accrue income. _____ 10. Change in…
TRUE OR FALSE?If beginning inventory of prior year is understated, retained earnings is understated
Which of the following best describes Accrued Liabilities?a. Long-term liabilities.b. Current amounts owed to suppliers of inventory.c. Expenses incurred, but not paid at the end of theaccounting period.d. Revenues that have been collected but not earned
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
TRUE OR FALSE?If ending inventory of prior year is overstated, retained earnings is understated
Indicate the section of a multiple-step income statementin which each of the following is shown.(a) Loss on inventory write-down.(b) Loss from strike.(c) Bad debt expense.(d) Loss on disposal of a discontinued operation.(e) Gain on sale of machinery.(f) Interest revenue.(g) Depreciation expense.(h) Material write-offs of notes receivable.
Using IFRS, 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 current period if it’s not considered practicable to report it retrospectively. d. In the statement of comprehensive income.