Intermediate Accounting: Reporting and Analysis
2nd Edition
ISBN: 9781285453828
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Textbook Question
Chapter 22, Problem 1E
The following are independent events:
- a. Changed from the LIFO to the FIFO inventory cost flow assumption.
- b. Reduced remaining service life of machinery from 10 to 8 years.
- c. Changed from an accelerated method to the straight-line method of
depreciating assets. - d. Wrote-down inventories because of obsolescence.
- e. Received damages won in a court suit instigated 5 years ago.
- f. Discovered that costs were recorded as an expense in a previous period but should have been recorded as an item of property, plant, and equipment.
- g. Wrote down property, plant, and equipment because of closure of inefficient plants.
- h. Changed from the successful-efforts method to the full-cost accounting method for oil exploration costs.
Required:
- 1. Indicate what type of accounting change or error, if any, is represented by each of the preceding items and the method of accounting (retrospective adjustment, prospective, or prior period adjustment) for the item in the financial statements of the current year.
- 2. Next Level Indicate the effect on the financial statements of the item (e.g., which accounts or line items are affected and is the effect an increase or a decrease).
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Preview Work
Discuss the appropriate treatment
in the financial statements of each
of the following. (a) Write-down
of plant assets due to impairment.
(b) A delivery expense on goods
-107 sold. (c) Additional depreciation on
factory machinery because of an
error in computing depreciation
for the previous year. (d) Rent
received from subletting a portion
of the office space. (e) A patent,
infringement suit, brought 2 years
ago against the company by
Writing
et ID: 5790953 er companyV, was settled this
year by a cash payment of
$725.000, (f) A reduction in the
Allowance for Doubtful Accounts
balance, because the account
excess of the probable less from
uncoliectible receivables,
15:35
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…
Answer the following question:
Which of the following is an example of a change in accounting policy?
a) Switching from the double declining balance to the straight-line method of depreciation
b) Adjusting the financial statements for an inventory count omission which occurred 2 years previously.
c) Switching from a salvage value of $10,000 to a salvage value of $4,000 in the 3rd year of the equipment’s 8-year life.
d) Using 5% for the allowance for bad debts instead of 3% because of the increased possibility of bankruptcy by customers.
e) None of the other answers are correct.
Chapter 22 Solutions
Intermediate Accounting: Reporting and Analysis
Ch. 22 - Prob. 1GICh. 22 - Prob. 2GICh. 22 - Prob. 3GICh. 22 - What steps are necessary to apply the...Ch. 22 - Prob. 5GICh. 22 - Prob. 6GICh. 22 - Prob. 7GICh. 22 - Prob. 8GICh. 22 - Define a change in estimate. What is the proper...Ch. 22 - Prob. 10GI
Ch. 22 - How is a change in depreciation method accounted...Ch. 22 - Describe a change in a reporting entity. How does...Ch. 22 - Prob. 13GICh. 22 - Prob. 14GICh. 22 - Prob. 15GICh. 22 - Prob. 16GICh. 22 - Prob. 17GICh. 22 - Prob. 18GICh. 22 - Prob. 19GICh. 22 - Prob. 20GICh. 22 - The cumulative effect of an accounting change...Ch. 22 - When a change in accounting principle is made...Ch. 22 - Prob. 3MCCh. 22 - A change in the expected service life of an asset...Ch. 22 - Prob. 5MCCh. 22 - Generally, how should a change in accounting...Ch. 22 - Prob. 7MCCh. 22 - A company has included in its consolidated...Ch. 22 - Prob. 9MCCh. 22 - Prob. 10MCCh. 22 - Prob. 1RECh. 22 - Prob. 2RECh. 22 - Prob. 3RECh. 22 - Prob. 4RECh. 22 - Bloom Company had beginning unadjusted retained...Ch. 22 - Suppose that Blake Companys total pretax...Ch. 22 - Bliss Company owns an asset with an estimated life...Ch. 22 - At the end of 2016, Framber Company received 8,000...Ch. 22 - Prob. 9RECh. 22 - Prob. 10RECh. 22 - Prob. 11RECh. 22 - Prob. 12RECh. 22 - The following are independent events: a. Changed...Ch. 22 - Prob. 2ECh. 22 - The following are independent events: a. A...Ch. 22 - Prob. 4ECh. 22 - Prob. 5ECh. 22 - Prob. 6ECh. 22 - Prob. 7ECh. 22 - Prob. 8ECh. 22 - Prob. 9ECh. 22 - Prob. 10ECh. 22 - Prob. 11ECh. 22 - The following are independent errors made by a...Ch. 22 - The following are independent errors made by a...Ch. 22 - Refer to the information in E22-13. Required:...Ch. 22 - Prob. 15ECh. 22 - Prob. 16ECh. 22 - Prob. 1PCh. 22 - Prob. 2PCh. 22 - Prob. 3PCh. 22 - Prob. 4PCh. 22 - Prob. 5PCh. 22 - Prob. 6PCh. 22 - Prob. 7PCh. 22 - At the beginning of 2017, Holden Companys...Ch. 22 - Prob. 9PCh. 22 - Prob. 10PCh. 22 - Prob. 11PCh. 22 - Prob. 12PCh. 22 - Prob. 13PCh. 22 - Prob. 14PCh. 22 - There are three types of accounting changes:...Ch. 22 - Prob. 2CCh. 22 - Prob. 3CCh. 22 - When the FASB issues a new generally accepted...Ch. 22 - It is important in accounting theory to be able to...Ch. 22 - Prob. 6CCh. 22 - Prob. 7CCh. 22 - Prob. 8CCh. 22 - Prob. 9CCh. 22 - Prob. 10C
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