FINANCIAL & MANAGERIAL ACCOUNTING
FINANCIAL & MANAGERIAL ACCOUNTING
9th Edition
ISBN: 9781266265549
Author: Wild
Publisher: MCG
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Chapter 11, Problem 20QS
To determine

Introduction: Every transaction that takes place as a part of business operations is recorded in the books of accounts. If some changes are determined at a later period, they are recorded as adjustments or changes in accounting estimates to correctly assess the financial position of the business at the end of the period.

The treatment of given situations.

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identify whether it is treated as a prior period adjustment or change in accounting estimate. After using an expected useful life of seven years and no salvage value to depreciate its office equipment over the preceding three years, the company decided early this year that the equipment will last only two more years.
identify whether it is treated as a prior period adjustment or change in accounting estimate. A review of notes payable discovers that three years ago the company reported the entire amount of a payment (principal and interest) on an installment note payable as interest expense. This mistake had a material effect on net income in that year.
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows: a. Net income, $250,000. b. Depreciation reported on the income statement, $135,000. C. Equipment was purchased at a cost of $420,000 and fully depreciated equipment costing $90,000 was discarded, with no salvage realized. d. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty. e. 30,000 shares of common stock were issued at $20 for cash. Cash dividends declared and paid, $45,000. f. Instructions 5 toment of cash flows, using the indirect method of presenting cash flows from op-

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FINANCIAL & MANAGERIAL ACCOUNTING

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