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The following are independent events: a. Changed from the FIFO to the LIFO inventory cost flow assumption. b. Wrote off patent due to the introduction of a competing product. c. Changed accounting policy of not accruing interest on notes payable to accruing interest. d. Increased allowance for uncollectible accounts from 2% to 4% of credit sales. e. Changed from straight-line to double-declining-balance method. f. Increased the rate used to compute warranty costs. g. Purchased another company that requires the presentation of consolidated financial statements in place of unconsolidated financial statements. 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 can increases or decreases generally be expected).

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 2E
Textbook Problem

The following are independent events:

  1. a. Changed from the FIFO to the LIFO inventory cost flow assumption.
  2. b. Wrote off patent due to the introduction of a competing product.
  3. c. Changed accounting policy of not accruing interest on notes payable to accruing interest.
  4. d. Increased allowance for uncollectible accounts from 2% to 4% of credit sales.
  5. e. Changed from straight-line to double-declining-balance method.
  6. f. Increased the rate used to compute warranty costs.
  7. g. Purchased another company that requires the presentation of consolidated financial statements in place of unconsolidated financial statements.

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 can increases or decreases generally be expected).

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Chapter 22 Solutions

Intermediate Accounting: Reporting And Analysis
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