SURVEY OF ACCOUNTING 360DAY CONNECT CAR
5th Edition
ISBN: 9781260591811
Author: Edmonds
Publisher: MCG
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Chapter 6, Problem 16Q
To determine
Explain the manner in which the error of expensing the cost of a truck will affect the income statement and the balance sheet in the year in which the mistake is made.
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John Smith mistakenly expensed the cost of a long-term tangible fixed asset. Specifically, he charged the cost of a truck to a delivery expense account. How will this error affect the income statement and the balance sheet in the year in which the mistake is made?
1. An entity made a very large arithmetical error in the calculation of depreciation. The
correction of the error when discovered in the next year should be treated as
Choices;
A prior period adjustment
Other expense for the year when the error was made.
An increase in depreciation expense for the year when the error is discovered.
A component of income for the year when the error is discovered but separately reported.
2. Items directly affecting Retained Earnings include all of the following Except
Choices;
Non-Current asset held for sale
Prior period errors and Effect of change in accounting policy.
Dividends declared
Appropriation of retained earnings
which of the following statements is not correct?
1) generally accepted accounting principles require that the original cost of a long-term asset continue to appear in the asset account until the disposition of the asset.
2)The book value of a long-term asset is reduced each year as depreciation is recorded Building and trucks are examples of long -term assets
3)Salvage value is computed by subtracting the accumulated depreciation from the cost of a long-term asset.
Chapter 6 Solutions
SURVEY OF ACCOUNTING 360DAY CONNECT CAR
Ch. 6 - 1. What is the difference between the functions of...Ch. 6 - Prob. 2QCh. 6 - Prob. 3QCh. 6 - 4. Define depreciation. What kind of asset...Ch. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - 8. Explain the historical cost concept as it...Ch. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - 12. Explain straight-line, units-of-production,...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - 17. What is salvage value?Ch. 6 - Prob. 18QCh. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - 22. Why would a company choose to depreciate one...Ch. 6 - Prob. 23QCh. 6 - 27. How are capital expenditures made to improve...Ch. 6 - Prob. 25QCh. 6 - Prob. 26QCh. 6 - Prob. 27QCh. 6 - Prob. 28QCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - LO 8-1 Exercise 8-6 A Allocating costs for a...Ch. 6 - Effect of depreciation on the accounting equation...Ch. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Events related to the acquisition, use, and...Ch. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Accounting for acquisition of assets, including a...Ch. 6 - Calculating depreciation expense using three...Ch. 6 - Determining the effect of depreciation expense on...Ch. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Revision of estimated salvage value Delta Machine...Ch. 6 - Purchase and use of tangible asset: Three...Ch. 6 - Recording continuing expenditures for plant assets...Ch. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Performing ratio analysis using real-world data...Ch. 6 - Prob. 1ATCCh. 6 - ATC 6-3 Research Assignment Comparing Microsofts...Ch. 6 - Prob. 4ATCCh. 6 - ATC 6-5 Ethical Dilemma Whats an expense? Several...
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- In subsequent years: Assuming that the asset is depreciable, the absence of depreciation charges in future years will increase the reported profit of those years so that the company's total profits over the entire useful life of the asset will in fact be unaffected by the error. Is that correct?arrow_forwardThere are various types of accounting changes, each of which is required to be reported differently. Required: 1. What type of accounting change is a change from the sum-of-the-years’-digits method of depreciation to the straight-line method for previously recorded assets? Under what circumstances does this type of accounting change occur? 2. What type of accounting change is a change in the expected service life of an asset arising because of more experience with the asset? Under what circumstances does this type of accounting change occur?arrow_forwardWhich of the following statements is false? A For tax purposes, companies can use the MACRS depreciation method. B When you change a depreciation estimate, such as salvage value, you need to make an adjustment to retained earnings. C If the expected future cash flow is less than the carrying amount, the asset is considered impaired. D If an impairment loss is recorded, depreciation must be recalculated since the book value changed. The answer A is wrongarrow_forward
- Which of the following statements is not correct? Multiple Choice The cost less the salvage value equals the depreciable base of a long-term asset. Uncollectible Accounts Expense is a contra asset account. If a firm records prepaid expense items in an expense account when they pay for them, their adjustment at the end of the period to record the unexpired portion would include a debit to an asset account and a credit to an expense account. Each adjustment for an accrued expense includes a credit to a liability account.arrow_forwardWhich of the following statements is false? A For tax purposes, companies can use the MACRS depreciation method. B When you change a depreciation estimate, such as salvage value, you need to make an adjustment to retained earnings. C If the expected future cash flow is less than the carrying amount, the asset is considered impaired. D If an impairment loss is recorded, depreciation must be recalculated since the book value changed.arrow_forward15 - Which of the following statements about depreciation is false? a) Depreciation is a type of expense that does not require a cash outflow. B) As a result of use, wear, tear, depreciation or obsolescence must be experienced in the tangible asset. NS) The asset to be depreciated should be among the assets of the enterprise. D) Proportional depreciation method can be applied for all tangible fixed assets. TO) For a property, plant and equipment to be depreciated, its economic life must be more than one year.arrow_forward
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