Question 1

Which of the following is not a change in accounting policy?

Accepted Answer

A)  Change in the depreciation method from straight-line to declining balance. 
B)  Change from completed contract to percentage of completion. 
C)  Change from Weighted Average to FIFO. 
D)  Change in depreciation from eight years to five years. 
E)  They are all changes in accounting policy. 
A)  Change in the depreciation method from straight-line to declining balance. 
B)  Change from completed contract to percentage of completion. 
C)  Change from Weighted Average to FIFO. 
D)  Change in depreciation from eight years to five years. 
E)  They are all changes in accounting policy.

Question 2

A retrospectively applied change in accounting policy relating to fixed assets where a company changes from the straight-line amortization method to the double-declining balance method would result in a decrease to opening retained earnings.

Accepted Answer

A) True 
 B)False

Question 3

A change from a non-GAAP procedure to a GAAP procedure usually is referred to as a change in accounting principle.

Accepted Answer

A) True 
 B)False

Question 4

Changes in estimates and prospectively-applied accounting policy changes occur more often in practice than do retrospectively-applied accounting policy changes.

Accepted Answer

A) True 
 B)False

Question 5

A change in policy mandated by a change of standard under IFRS is an example of a mandatory policy change.

Accepted Answer

A) True 
 B)False

Question 6

The following errors were discovered during January 20x3 (prior to any reversing entries).The accounting period ends December 31.   What effect did these errors have on the 20x2 pre-tax income?

Accepted Answer

A)  Overstated by $2,000 
B)  Understated by $2,000 
C)  Overstated by $1,000 
D)  Understated by $1,000 
A)  Overstated by $2,000 
B)  Understated by $2,000 
C)  Overstated by $1,000 
D)  Understated by $1,000

Question 7

Accounting changes reported by using the current approach,require that the "catch-up adjustment" include the effect on earnings in the year of the change.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not an example of a change in accounting estimate?

Accepted Answer

A)  Change in the estimated loss rate on receivables 
B)  Change in the residual value of natural resources subject to depletion 
C)  Change in the expected warranty costs on goods sold under a warranty 
D)  Change in the expected recovery of a deferred charge 
E)  Change in the composition of inventory cost 
A)  Change in the estimated loss rate on receivables 
B)  Change in the residual value of natural resources subject to depletion 
C)  Change in the expected warranty costs on goods sold under a warranty 
D)  Change in the expected recovery of a deferred charge 
E)  Change in the composition of inventory cost

Question 9

Depreciation expense for the most recent fiscal year on equipment purchased a few years ago is $10,000.The balance sheet at the end of the same year disclosed the following:   The asset is not expected to have a salvage value and the firm depreciates the asset on the straight-line basis.In March of the next year (the year of change),the firm decided to reduce the original total useful life 20% and that a salvage value of $30,000 is a reasonable estimate.What is depreciation in the year of the change?

Accepted Answer

A)  $11,500 
B)  $13,000 
C)  $10,000 
D)  $12,000 
E)  $12,500 
A)  $11,500 
B)  $13,000 
C)  $10,000 
D)  $12,000 
E)  $12,500

Question 10

The failure to accrue revenues for services rendered but not billable until future periods would be considered a self-correcting error.

Accepted Answer

A) True 
 B)False

Question 11

An asset that cost $49,500 was being depreciated on a sum-of-the-years'-digits basis over five years with an estimated residual value of $4,500.After the end of the third year,it was decided to change to straight-line depreciation (ignore income taxes).
(a)Give any required entry as of the beginning of year 4.
(b)Give the adjusting entry to record depreciation at the end of the fourth year,taking into account the new decision.

Accepted Answer

(a)Entry t

Question 12

ABC Inc.'s Year 1 ending inventory was overstated by $20,000.Its Year 2 ending inventory was understated by $30,000.Assuming that the books for Year 2 are still open,which of the following adjustments would be required? Assume a tax rate of 25%.

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 13

Which one of the following statements is not correct?

Accepted Answer

A)  A change from an inappropriate accounting principle to a proper one should be accounted for as an accounting error. 
B)  Assets purchased on the 14th of the month may be depreciated from the first of the month for practical reasons. 
C)  Depreciation accounting is a process of allocation of periodic expense, rather than one of asset valuation. 
D)  Use of straight-line depreciation gives a higher total expense than accelerated methods over the total useful life of the asset. 
A)  A change from an inappropriate accounting principle to a proper one should be accounted for as an accounting error. 
B)  Assets purchased on the 14th of the month may be depreciated from the first of the month for practical reasons. 
C)  Depreciation accounting is a process of allocation of periodic expense, rather than one of asset valuation. 
D)  Use of straight-line depreciation gives a higher total expense than accelerated methods over the total useful life of the asset.

Question 14

Complete the following tabulation by inserting in each square the appropriate code as follows: "O" for Overstated; "U" for Understated by; and "N" for no effect Complete all squares.Each transaction (but not years)is a separate situation independent of the others.

Accepted Answer

The answer of Complete the following tabulation by inserting in...

Question 15

A change in accounting principle occurs when a company adopts a principle different from an inappropriate procedure that was used previously.

Accepted Answer

A) True 
 B)False

Question 16

In reporting the effect of an accounting change on comparative financial statements,recommended accounting procedure requires that the following be used for correcting an accounting error:

Accepted Answer

A)  Prospective application. 
B)  Future application. 
C)  Retrospective application. 
D)  Retrospective, no restatement application. 
A)  Prospective application. 
B)  Future application. 
C)  Retrospective application. 
D)  Retrospective, no restatement application.

Question 17

The correction of an accounting error affecting prior years' income is reported and recorded by using the retrospective approach.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following changes would be disclosed as a change in accounting principle but reported by applying the new method retrospectively as restatements of prior periods?

Accepted Answer

A)  Change from the first-in, first-out method to the last-in, first-out method of inventory pricing 
B)  Change in the composition of elements included in inventory 
C)  Change from completed-contract accounting to percentage of completion 
D)  Change from the straight-line method to an accelerated method of depreciation 
A)  Change from the first-in, first-out method to the last-in, first-out method of inventory pricing 
B)  Change in the composition of elements included in inventory 
C)  Change from completed-contract accounting to percentage of completion 
D)  Change from the straight-line method to an accelerated method of depreciation

Question 19

Which of the following changes would be accounted for prospectively?

Accepted Answer

A)  Changing from declining-balance depreciation to straight-line depreciation 
B)  Change in the expected life of a depreciable asset 
C)  First time presentation of assumption financial statements with the FIFO cost flow 
D)  Error corrections 
A)  Changing from declining-balance depreciation to straight-line depreciation 
B)  Change in the expected life of a depreciable asset 
C)  First time presentation of assumption financial statements with the FIFO cost flow 
D)  Error corrections

Question 20

Early adoption of involuntary changes in accounting policy is prohibited under IFRS.

Accepted Answer

A) True 
 B)False

Which of the following is not a change in accounting policy?

A retrospectively applied change in accounting policy relating to fixed assets where a company changes from the straight-line amortization method to the double-declining balance method would result in a decrease to opening retained earnings.

A change from a non-GAAP procedure to a GAAP procedure usually is referred to as a change in accounting principle.

Changes in estimates and prospectively-applied accounting policy changes occur more often in practice than do retrospectively-applied accounting policy changes.

A change in policy mandated by a change of standard under IFRS is an example of a mandatory policy change.

The following errors were discovered during January 20x3 (prior to any reversing entries).The accounting period ends December 31. What effect did these errors have on the 20x2 pre-tax income?

Accounting changes reported by using the current approach,require that the "catch-up adjustment" include the effect on earnings in the year of the change.

Which of the following is not an example of a change in accounting estimate?

The failure to accrue revenues for services rendered but not billable until future periods would be considered a self-correcting error.

ABC Inc.'s Year 1 ending inventory was overstated by $20,000.Its Year 2 ending inventory was understated by $30,000.Assuming that the books for Year 2 are still open,which of the following adjustments would be required? Assume a tax rate of 25%.

Which one of the following statements is not correct?

Complete the following tabulation by inserting in each square the appropriate code as follows: "O" for Overstated; "U" for Understated by; and "N" for no effect Complete all squares.Each transaction (but not years)is a separate situation independent of the others.

A change in accounting principle occurs when a company adopts a principle different from an inappropriate procedure that was used previously.

In reporting the effect of an accounting change on comparative financial statements,recommended accounting procedure requires that the following be used for correcting an accounting error:

The correction of an accounting error affecting prior years' income is reported and recorded by using the retrospective approach.

Which of the following changes would be disclosed as a change in accounting principle but reported by applying the new method retrospectively as restatements of prior periods?

Which of the following changes would be accounted for prospectively?

Early adoption of involuntary changes in accounting policy is prohibited under IFRS.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 10: Depreciation, Amortization, and Impairment

Which of the following is not a change in accounting policy?

A retrospectively applied change in accounting policy relating to fixed assets where a company changes from the straight-line amortization method to the double-declining balance method would result in a decrease to opening retained earnings.

A change from a non-GAAP procedure to a GAAP procedure usually is referred to as a change in accounting principle.

Changes in estimates and prospectively-applied accounting policy changes occur more often in practice than do retrospectively-applied accounting policy changes.

A change in policy mandated by a change of standard under IFRS is an example of a mandatory policy change.

The following errors were discovered during January 20x3 (prior to any reversing entries).The accounting period ends December 31. What effect did these errors have on the 20x2 pre-tax income?

Accounting changes reported by using the current approach,require that the "catch-up adjustment" include the effect on earnings in the year of the change.

Which of the following is not an example of a change in accounting estimate?

The failure to accrue revenues for services rendered but not billable until future periods would be considered a self-correcting error.

ABC Inc.'s Year 1 ending inventory was overstated by $20,000.Its Year 2 ending inventory was understated by $30,000.Assuming that the books for Year 2 are still open,which of the following adjustments would be required? Assume a tax rate of 25%.

Which one of the following statements is not correct?

Complete the following tabulation by inserting in each square the appropriate code as follows: "O" for Overstated; "U" for Understated by; and "N" for no effect Complete all squares.Each transaction (but not years)is a separate situation independent of the others.

A change in accounting principle occurs when a company adopts a principle different from an inappropriate procedure that was used previously.

In reporting the effect of an accounting change on comparative financial statements,recommended accounting procedure requires that the following be used for correcting an accounting error:

The correction of an accounting error affecting prior years' income is reported and recorded by using the retrospective approach.

Which of the following changes would be disclosed as a change in accounting principle but reported by applying the new method retrospectively as restatements of prior periods?

Which of the following changes would be accounted for prospectively?

Early adoption of involuntary changes in accounting policy is prohibited under IFRS.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Financial Instruments: Investments in Bonds and Equity Securities

Filters