Q2: Consider the following accounting changes: • decrease in the estimated life of depreciable assets • decrease in doubtful debts as a percentage of gross receivables • recognition of revenue from gold mining from when it was extracted rather than when gold is delivered capitalisation of a higher proportion of R&D costs a) If management reports truthfully, what economic events are likely to prompt the above accounting changes? b) If potential earnings management had taken place how would the above accounting changes impact the financial statements?

Q2: Consider the following accounting changes: • decrease in the estimated life of depreciable assets • decrease in doubtful debts as a percentage of gross receivables • recognition of revenue from gold mining from when it was extracted rather than when gold is delivered capitalisation of a higher proportion of R&D costs a) If management reports truthfully, what economic events are likely to prompt the above accounting changes? b) If potential earnings management had taken place how would the above accounting changes impact the financial statements?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 12MCQ: Which of the following statements is true? a. The fixed asset turnover ratio assists managers in...

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1. What anount should be reported as total assets after restatement for hyperinflation? a. 5,150,000 b. 3,950,000 c. 4,800,000 d. 4,850,000 2. What amount should be reported as total liabilities after restatement for hyperinflation? a. 2,400,000 b. 1,200,000 c. 1,325,000 d. 1,500,000 3. What amount should be reported as retained earnings after adjusting for hyperinflation? a. 2,350,000 b. 2,750,000 c. 3,550,000 d. 2,625,000
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