Question 1

Which of the following changes would be accounted for using the approach of a retrospective approach without restatement?

Accepted Answer

A)  Change in the estimated life of a depreciable asset 
B)  Change from a non-GAAP accounting method to a GAAP method of accounting for bad debts 
C)  Overstatement of unearned revenue of the prior period 
D)  Change in the method of accounting for long-term construction contracts 
E)  Change to FIFO with previous year's information unavailable 
A)  Change in the estimated life of a depreciable asset 
B)  Change from a non-GAAP accounting method to a GAAP method of accounting for bad debts 
C)  Overstatement of unearned revenue of the prior period 
D)  Change in the method of accounting for long-term construction contracts 
E)  Change to FIFO with previous year's information unavailable

Question 2

Which of the following is not an example of an accounting error,as distinguished from a change in accounting principle or change in estimate?

Accepted Answer

A)  Misstatement of an accounting value, such as inventory, deferred charge or credit, liabilities, or owners' equity. 
B)  Incorrect classification of expenditure as between expense and an asset. 
C)  Incorrect or unrealistic allocations of accounting values. 
D)  Failure to recognize accruals and deferrals. 
E)  Recognition of a gain on disposal of fully depreciated property. 
A)  Misstatement of an accounting value, such as inventory, deferred charge or credit, liabilities, or owners' equity. 
B)  Incorrect classification of expenditure as between expense and an asset. 
C)  Incorrect or unrealistic allocations of accounting values. 
D)  Failure to recognize accruals and deferrals. 
E)  Recognition of a gain on disposal of fully depreciated property.

Question 3

A change in an amortization rate,such as on a copyright,should be accounted for:

Accepted Answer

A)  Retrospectively. 
B)  By recording an amount in retained earnings only. 
C)  Prospectively. 
D)  Currently. 
A)  Retrospectively. 
B)  By recording an amount in retained earnings only. 
C)  Prospectively. 
D)  Currently.

Question 4

An error in the inventory amount recorded involves a self-correcting error.

Accepted Answer

A) True 
 B)False

Question 5

An accounting clerk working for DBB neglected to record the purchase of merchandise in 20x1,which was,shipped f.o.b.shipping point on December 20,20x1,and which arrived on December 31.The goods were included in the ending 20x1 inventory.What was the effect on DBB's 20x1 cost of goods sold?

Accepted Answer

A)  Cost of goods sold was correct. 
B)  Cost of goods sold was understated. 
C)  Cost of goods sold was overstated. 
D)  Data are not available to determine effect on cost of goods sold. 
A)  Cost of goods sold was correct. 
B)  Cost of goods sold was understated. 
C)  Cost of goods sold was overstated. 
D)  Data are not available to determine effect on cost of goods sold.

Question 6

If BJC's beginning inventory in the current year is overstated,and that is the only error in the current year,then BJC's income for the current year will be:

Accepted Answer

A)  Understated; Assets will be correct. 
B)  Understated; Assets will be overstated. 
C)  Overstated; Assets will be overstated. 
D)  Understated; Assets will be understated. 
A)  Understated; Assets will be correct. 
B)  Understated; Assets will be overstated. 
C)  Overstated; Assets will be overstated. 
D)  Understated; Assets will be understated.

Question 7

A change in the salvage value of a depreciable asset should be accounted for as a:

Accepted Answer

A)  Change in accounting entity. 
B)  Correction of an accounting error. 
C)  Change in accounting estimate. 
D)  Change in accounting principle. 
A)  Change in accounting entity. 
B)  Correction of an accounting error. 
C)  Change in accounting estimate. 
D)  Change in accounting principle.

Question 8

Which of the following events would require disclosure in the current financial statements?

Accepted Answer

A)  Change in the method used to calculate bad debt expense. 
B)  Change from Weighted Average to FIFO for merchandise inventory. 
C)  Change in the estimated amortization period for an intangible asset. 
D)  Change in recording the income for long-term construction contracts 
E)  All of these choices are correct. 
A)  Change in the method used to calculate bad debt expense. 
B)  Change from Weighted Average to FIFO for merchandise inventory. 
C)  Change in the estimated amortization period for an intangible asset. 
D)  Change in recording the income for long-term construction contracts 
E)  All of these choices are correct.

Question 9

Both IFRS and ASPE require note disclosures pertaining to accounting standards not yet in effect.

Accepted Answer

A) True 
 B)False

Question 10

A change in accounting principle occurs when a company adopts a principle different from an approved principle previously used.

Accepted Answer

A) True 
 B)False

Question 11

An asset cost $12,000 when acquired and had an estimated useful life of 10 years with no estimated residual value.Use straight-line depreciation.During Year 7,the overall life was changed to 12 years.
(a)What should be recorded as depreciation expense for Year 7? $_________________________.
(b)What would the balance of accumulated depreciation be at the start of Year 8? $______________________________
(c)Would a correCt.ing entry be made during Year 7 for the change?
Yes ____________ No ______________ Explain why._______________

Accepted Answer

(a)$12,000 / 10 years = $1,200

Question 12

With respect to the application of retrospective accounting changes,both IFRS and ASPE require that an opening balance sheet be provided for the start of the earliest period affected by the changes.

Accepted Answer

A) True 
 B)False

Question 13

On January 1,Year 1,XYZ Inc.paid three years' worth of rent in the amount of $36,000.The entire amount was expensed in Year 1.Assuming that the Year 2 books are still open,which of the following best describes the required adjustment to the company's December 31st,Year 2 books? Assume a tax rate of 20%.

Accepted Answer

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

Question 14

Accounting policy changes must always be handled retrospectively.

Accepted Answer

A) True 
 B)False

Question 15

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 now closed,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 16

When a firm changes only the estimated residual value of equipment:

Accepted Answer

A)  Depreciation must be recomputed for each previous year based on the new residual value. 
B)  The remaining book value, reduced by the new residual value, is the basis for subsequent depreciation. 
C)  The original cost, reduced by the new residual value, is the basis for subsequent depreciation. 
D)  No adjustment is needed. 
A)  Depreciation must be recomputed for each previous year based on the new residual value. 
B)  The remaining book value, reduced by the new residual value, is the basis for subsequent depreciation. 
C)  The original cost, reduced by the new residual value, is the basis for subsequent depreciation. 
D)  No adjustment is needed.

Question 17

A company has been using straight-line depreciation over the last several years,which has amounted to a total of $20,000 depreciation before tax for those past years.This year,it decided to change to units of production,which would have caused $30,000 of depreciation to be recognized in those past years,before tax.The tax rate has always been 40%.This year's depreciation under both methods is:   The cumulative effect account resulting from this change will decrease net income by:

Accepted Answer

A)  $6,600. 
B)  $10,000. 
C)  $4,000. 
D)  $6,000. 
A)  $6,600. 
B)  $10,000. 
C)  $4,000. 
D)  $6,000.

Question 18

Which of the following combinations of errors would cause a $2,000 overstatement of pre-tax income?

Accepted Answer

A)  $4,000 Overstated by beginning inventory and $2,000 Understated by ending inventory 
B)  $4,000 Understated by beginning inventory and $2,000 Understated by ending inventory 
C)  $4,000 Overstated ending by inventory and $2,000 Understated by depreciation expense 
D)  $4,000 Understated by depreciation expense and $2,000 Understated by beginning inventory 
A)  $4,000 Overstated by beginning inventory and $2,000 Understated by ending inventory 
B)  $4,000 Understated by beginning inventory and $2,000 Understated by ending inventory 
C)  $4,000 Overstated ending by inventory and $2,000 Understated by depreciation expense 
D)  $4,000 Understated by depreciation expense and $2,000 Understated by beginning inventory

Question 19

A firm changes from accelerated depreciation to straight-line depreciation in 20x1:
Depreciation: Total before 20x1:   Provide the 20x1 entries to record the accounting change and to record 20x1 depreciation expense,ignoring taxes.

Accepted Answer

The answer of A firm changes from accelerated depreciation to...

Question 20

WZ acquired some machinery on January 2,20x1.WZ used straight-line depreciation with an estimated life of 15 years with no residual value.On January 1,20x6,WZ estimated that the remaining life of this machinery was 6 years with no residual value.How should this change be accounted for by WZ?

Accepted Answer

A)  Revising future depreciation per year, computed by dividing the book value on January 1, 20x6 by six. 
B)  Revising future depreciation per year, computed by dividing the original cost by six. 
C)  Estimating the effect of the change on each year's net earnings, but maintaining the method of depreciation as originally determined. 
D)  None of these choices are correct. 
A)  Revising future depreciation per year, computed by dividing the book value on January 1, 20x6 by six. 
B)  Revising future depreciation per year, computed by dividing the original cost by six. 
C)  Estimating the effect of the change on each year's net earnings, but maintaining the method of depreciation as originally determined. 
D)  None of these choices are correct.

Which of the following changes would be accounted for using the approach of a retrospective approach without restatement?

Which of the following is not an example of an accounting error,as distinguished from a change in accounting principle or change in estimate?

A change in an amortization rate,such as on a copyright,should be accounted for:

An error in the inventory amount recorded involves a self-correcting error.

An accounting clerk working for DBB neglected to record the purchase of merchandise in 20x1,which was,shipped f.o.b.shipping point on December 20,20x1,and which arrived on December 31.The goods were included in the ending 20x1 inventory.What was the effect on DBB's 20x1 cost of goods sold?

If BJC's beginning inventory in the current year is overstated,and that is the only error in the current year,then BJC's income for the current year will be:

A change in the salvage value of a depreciable asset should be accounted for as a:

Which of the following events would require disclosure in the current financial statements?

Both IFRS and ASPE require note disclosures pertaining to accounting standards not yet in effect.

A change in accounting principle occurs when a company adopts a principle different from an approved principle previously used.

With respect to the application of retrospective accounting changes,both IFRS and ASPE require that an opening balance sheet be provided for the start of the earliest period affected by the changes.

Accounting policy changes must always be handled retrospectively.

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 now closed,which of the following adjustments would be required? Assume a tax rate of 25%.

When a firm changes only the estimated residual value of equipment:

Which of the following combinations of errors would cause a $2,000 overstatement of pre-tax income?

A firm changes from accelerated depreciation to straight-line depreciation in 20x1: Depreciation: Total before 20x1: Provide the 20x1 entries to record the accounting change and to record 20x1 depreciation expense,ignoring taxes.

WZ acquired some machinery on January 2,20x1.WZ used straight-line depreciation with an estimated life of 15 years with no residual value.On January 1,20x6,WZ estimated that the remaining life of this machinery was 6 years with no residual value.How should this change be accounted for by WZ?

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 changes would be accounted for using the approach of a retrospective approach without restatement?

Which of the following is not an example of an accounting error,as distinguished from a change in accounting principle or change in estimate?

A change in an amortization rate,such as on a copyright,should be accounted for:

An error in the inventory amount recorded involves a self-correcting error.

An accounting clerk working for DBB neglected to record the purchase of merchandise in 20x1,which was,shipped f.o.b.shipping point on December 20,20x1,and which arrived on December 31.The goods were included in the ending 20x1 inventory.What was the effect on DBB's 20x1 cost of goods sold?

If BJC's beginning inventory in the current year is overstated,and that is the only error in the current year,then BJC's income for the current year will be:

A change in the salvage value of a depreciable asset should be accounted for as a:

Which of the following events would require disclosure in the current financial statements?

Both IFRS and ASPE require note disclosures pertaining to accounting standards not yet in effect.

A change in accounting principle occurs when a company adopts a principle different from an approved principle previously used.

With respect to the application of retrospective accounting changes,both IFRS and ASPE require that an opening balance sheet be provided for the start of the earliest period affected by the changes.

Accounting policy changes must always be handled retrospectively.

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 now closed,which of the following adjustments would be required? Assume a tax rate of 25%.

When a firm changes only the estimated residual value of equipment:

Which of the following combinations of errors would cause a $2,000 overstatement of pre-tax income?

A firm changes from accelerated depreciation to straight-line depreciation in 20x1: Depreciation: Total before 20x1: Provide the 20x1 entries to record the accounting change and to record 20x1 depreciation expense,ignoring taxes.

WZ acquired some machinery on January 2,20x1.WZ used straight-line depreciation with an estimated life of 15 years with no residual value.On January 1,20x6,WZ estimated that the remaining life of this machinery was 6 years with no residual value.How should this change be accounted for by WZ?

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