EBK INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946465
Author: SANNELLA
Publisher: VST
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Textbook Question
Chapter 21, Problem 1SSC
Surfing the Standards: Change in Accounting Principle
- 1. Read FASB ASC 250-10-S99 to respond to the following question. ASCO Recordings has decided to change its inventory system from the LIFO method to the FIFO method for the 2015 fiscal year. Because it does not carry much inventory, the change in principle does not have a material effect on the financial statements of prior periods. Accordingly, it plans not to adjust comparative financial statements presented but rather to report the cumulative effect of the change through
retained earnings as of the beginning of the 2015 fiscal year. Is this approach permissible? If not, how must ASCO Recordings report this change in principle? - 2. Read FASB ASC 250-10-45 to respond to the following question Basty Needleworks, a calendar-year firm, has decided to change its inventory system from the FIFO method to the LIFO method. It made this decision in July 2015, and thus plans to report under LIFO for the first time in its third quarter of 2015 filings. Based on the impracticability rules associated with retrospective application, it plans to use the prospective method of reporting for the change in principle beginning in the third quarter. Is this approach permissible? If not, how must Basty report this change in principle?
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This is a multiple answer question.
Duncan Company miscounted its ending inventory during the December 31, 2025 physical count. Which items will be wrong on the 2025 financial statements assuming this mistake is not discovered until the next year? (Choose all that apply).
A. Noncurrent assets
B. Net income
C. Inventory
D. Liabilities
E. Cost of goods sold
Problem 1. How much is the adjusted inventory? *
Makati Company is preparing its 2022 financial statements. Prior to any adjustments,
inventory is valued at P1,605,000. During your audit, you found the following information
relating to certain inventory transactions from your cutoff test.
a.
b.
C.
e.
f.
Goods valued at P110,000 are on consignment with a customer. These goods were
not included in the ending inventory figure.
d.
A P35,000 shipment of goods to a customer on December 31, terms FOB destination
was not included in the year-end inventory. The goods cost P26,000 and were
delivered to the customer on January 8, 2023. The sale was properly recorded in
2023.
g.
Goods costing P87,000 were received from a vendor on January 5, 2023. The
related invoice was received and recorded on January 12, 2023. The goods were
shipped on December 31, 2022, terms FOB shipping point.
Goods costing P85,000, sold for P102,000, were shipped on December 31, 2022,
and were delivered to the customer on…
BTS, Inc. has adopted a new accounting system for measuring the value of its inventory from weighted average method (which they used from start of operations in 2017 until 2019) to first-in, first-out method (which they will use starting 2020). In year 2020, how will BTS, Inc. account for the change in its cost formula?
A.Treated as change in accounting estimate with a retrospective adjustment for years 2017 to 2019
B.An entry will not be necessary since past is past.
C.Treated as change in accounting policy with an adjustment in Retained Earnings during 2020
D.Treated as change in accounting policy which will only affect year 2020 and onwards
Chapter 21 Solutions
EBK INTERMEDIATE ACCOUNTING
Ch. 21 - Are accounting changes permitted in financial...Ch. 21 - How do firms report accounting changes under the...Ch. 21 - Prob. 21.3QCh. 21 - How do firms account for changes in accounting...Ch. 21 - Prob. 21.5QCh. 21 - Prob. 21.6QCh. 21 - Prob. 21.7QCh. 21 - Prob. 21.8QCh. 21 - Do accounting errors that self-correct within two...Ch. 21 - Does a firm need to correct an error that...
Ch. 21 - Prob. 21.1MCCh. 21 - Prob. 21.2MCCh. 21 - Prob. 21.3MCCh. 21 - Prob. 21.4MCCh. 21 - Prob. 21.5MCCh. 21 - Prob. 21.1BECh. 21 - Prob. 21.2BECh. 21 - Prob. 21.3BECh. 21 - Prob. 21.4BECh. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.6BECh. 21 - Prob. 21.7BECh. 21 - Prob. 21.8BECh. 21 - Prob. 21.9BECh. 21 - Prob. 21.10BECh. 21 - Prob. 21.11BECh. 21 - Prob. 21.12BECh. 21 - Prob. 21.13BECh. 21 - Prob. 21.14BECh. 21 - Prob. 21.1ECh. 21 - Prob. 21.2ECh. 21 - Prob. 21.3ECh. 21 - Prob. 21.4ECh. 21 - Prob. 21.5ECh. 21 - Prob. 21.6ECh. 21 - Error Analysis and Correction. Feinstein and...Ch. 21 - Prob. 21.8ECh. 21 - Prob. 21.9ECh. 21 - Prob. 21.10ECh. 21 - Prob. 21.1PCh. 21 - Prob. 21.2PCh. 21 - Prob. 21.3PCh. 21 - Prob. 21.4PCh. 21 - Prob. 21.5PCh. 21 - Prob. 21.6PCh. 21 - Prob. 21.7PCh. 21 - Cases Judgment Case Judgment Case: Materiality and...Ch. 21 - Prob. 1FSCCh. 21 - Surfing the Standards: Change in Accounting...Ch. 21 - Prob. 1BCC
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