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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).

BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 22, Problem 1E
Textbook Problem

The following are independent events:

  1. a. Changed from the LIFO to the FIFO inventory cost flow assumption.
  2. b. Reduced remaining service life of machinery from 10 to 8 years.
  3. c. Changed from an accelerated method to the straight-line method of depreciating assets.
  4. d. Wrote-down inventories because of obsolescence.
    1. e. Received damages won in a court suit instigated 5 years ago.
  5. 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.
  6. g. Wrote down property, plant, and equipment because of closure of inefficient plants.
  7. h. Changed from the successful-efforts method to the full-cost accounting method for oil exploration costs.

Required:

  1. 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. 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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Chapter 22 Solutions

Intermediate Accounting: Reporting And Analysis
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