Question 1

IFRS differ from U.S. GAAP regarding the indirect effects of a change in accounting principle in that IFRS

Accepted Answer

A)  do not specify when the indirect effects should be reported or what disclosures are required. 
B)  do not specify when the indirect effects should be reported. 
C)  do not specify what disclosures are required. 
D)  specify when the indirect effects should be reported and what disclosures are required. 
A)  do not specify when the indirect effects should be reported or what disclosures are required. 
B)  do not specify when the indirect effects should be reported. 
C)  do not specify what disclosures are required. 
D)  specify when the indirect effects should be reported and what disclosures are required.

Question 2

A change in unit depletion rate would be accounted for as a

Accepted Answer

A)  correction of an accounting error. 
B)  change in accounting principle. 
C)  change in accounting estimate. 
D)  change in accounting estimate effected through a change in accounting principle. 
A)  correction of an accounting error. 
B)  change in accounting principle. 
C)  change in accounting estimate. 
D)  change in accounting estimate effected through a change in accounting principle.

Question 3

Refer to Exhibit 22-1. Assuming an income tax rate of 35%, what is the amount of depreciation expense related to the equipment reported in Chrissy's 2018 income statement?

Accepted Answer

A)  $124,000 
B)  $100,750 
C)  $140,000 
D)  $155,000 
A)  $124,000 
B)  $100,750 
C)  $140,000 
D)  $155,000

Question 4

Which of the following is the proper time period in which to record a change in accounting estimate?

Accepted Answer

A)  current period and future periods 
B)  current period and retroactively 
C)  retroactively only 
D)  current period only 
A)  current period and future periods 
B)  current period and retroactively 
C)  retroactively only 
D)  current period only

Question 5

The Max Company began its operations on January 1, 2016, and used an accelerated method of depreciation for its machinery and equipment. On January 1, 2018, Max adopted the straight-line method of depreciation. The following information is available regarding depreciation expense for each method: $$\begin{array} { l r r } 
\text { Year } & \begin{array} { r } 
\text { Accelerated } \
\text { Depreciation }
\end{array} & \begin{array} { r } 
\text { Straight-line } \
\text { Depreciation }
\end{array} \\hline
2016 & \$ 175,000 & \$ 150,000 \
2017 & 200,000 & 180,000 \
2018 & 245,000 & 230,000
\end{array}$$ What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2018, due to changing to a different depreciation method?

Accepted Answer

A)  $0 
B)  a decrease of $45,000 
C)  an increase of $45,000 
D)  an increase of $60,000 
A)  $0 
B)  a decrease of $45,000 
C)  an increase of $45,000 
D)  an increase of $60,000

Question 6

Which of the following is a counterbalancing error?

Accepted Answer

A)  understated depletion expense 
B)  bond premium under-amortized 
C)  prepaid expense adjusted incorrectly 
D)  overstated depreciation expenses 
A)  understated depletion expense 
B)  bond premium under-amortized 
C)  prepaid expense adjusted incorrectly 
D)  overstated depreciation expenses

Question 7

Langley Company received merchandise on December 31, 2016. Langley failed to record the purchase on account because the invoice was inadvertently destroyed. The merchandise was, however, included in ending inventory. What would be the effect of this event on the financial statements as of December 31, 2016?

Accepted Answer

A)  assets and liabilities would be understated 
B)  assets and owners' equity would be overstated 
C)  liabilities would be understated and retained earnings overstated 
D)  liabilities would be overstated and retained earnings understated 
A)  assets and liabilities would be understated 
B)  assets and owners' equity would be overstated 
C)  liabilities would be understated and retained earnings overstated 
D)  liabilities would be overstated and retained earnings understated

Question 8

Exhibit 22-6
North Company has a fiscal year ending on December 31. Its financial statements for the years ended December
31, 2016 and 2017 contained the following errors: $\begin{array}{lll}
&2016&2017\\hline
\text { Ending inventory } & \$ 19,000 \text { understated } & \$ 15,000 \text { overstated } \
\text { Bad debt expense } & 2,000 \text { overstated } & 1,000 \text { understate }
\end{array}$ Assume no correcting entries have been made.
-Refer to Exhibit 22-6. By how much was North's 2016 net income overstated or understated?

Accepted Answer

A)  $21,000 overstated 
B)  $17,000 overstated 
C)  $17,000 understated 
D)  $21,000 understated 
A)  $21,000 overstated 
B)  $17,000 overstated 
C)  $17,000 understated 
D)  $21,000 understated

Question 9

Arguments in favor of the retrospective application method include

Accepted Answer

A)  the adjustments to be made when reading the financial statements are easier to determine. 
B)  a company's current years earnings should not be penalized decreased) by events beyond the control of company's management. 
C)  all financial statements presented at a given date are consistent. 
D)  evaluating financial statements is easier when all principles used are known by the reader. 
A)  the adjustments to be made when reading the financial statements are easier to determine. 
B)  a company's current years earnings should not be penalized decreased) by events beyond the control of company's management. 
C)  all financial statements presented at a given date are consistent. 
D)  evaluating financial statements is easier when all principles used are known by the reader.

Question 10

Which of the following should be reported as a change in accounting estimate?

Accepted Answer

A)  change in the reported beginning inventory amount due to a discovery of a bookkeeping error 
B)  increase in bad debt rate applied to net sales 
C)  change from completed-contract method to the percentage-of-completion for revenue recognition 
D)  change made to comply with a new FASB pronouncement 
A)  change in the reported beginning inventory amount due to a discovery of a bookkeeping error 
B)  increase in bad debt rate applied to net sales 
C)  change from completed-contract method to the percentage-of-completion for revenue recognition 
D)  change made to comply with a new FASB pronouncement

IFRS differ from U.S. GAAP regarding the indirect effects of a change in accounting principle in that IFRS

A change in unit depletion rate would be accounted for as a

Refer to Exhibit 22-1. Assuming an income tax rate of 35%, what is the amount of depreciation expense related to the equipment reported in Chrissy's 2018 income statement?

Which of the following is the proper time period in which to record a change in accounting estimate?

Which of the following is a counterbalancing error?

Arguments in favor of the retrospective application method include

Which of the following should be reported as a change in accounting estimate?

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Long-Term Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Understanding Time Value of Money Formulas and Concepts

Filters

Exam 22: Accounting for Changes and Errors

IFRS differ from U.S. GAAP regarding the indirect effects of a change in accounting principle in that IFRS

A change in unit depletion rate would be accounted for as a

Refer to Exhibit 22-1. Assuming an income tax rate of 35%, what is the amount of depreciation expense related to the equipment reported in Chrissy's 2018 income statement?

Which of the following is the proper time period in which to record a change in accounting estimate?

Which of the following is a counterbalancing error?

Arguments in favor of the retrospective application method include

Which of the following should be reported as a change in accounting estimate?

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Long-Term Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Understanding Time Value of Money Formulas and Concepts

Filters