Exam 20: Accounting Changes

Error corrections require restatement of all the affected prior year financial statements reported in comparative financial statements.

All changes reported using the retrospective approach require prior period adjustments.

Which of the following changes in inventory costing usually should not be reported by revising the financial statements of prior periods?

Red Corp.constructed a machine at a total cost of $70 million.Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013.The machine was being depreciated over a 10-year life using the straight-line method.The residual value is expected to be $4 million.At the beginning of 2016,Red decided to change to the sum-of-the-years'-digits method.Ignoring income taxes,what will be Red's depreciation expense for 2016?

SkiPark Company purchased a gondola for $440,000 (no residual value)at the beginning of 2013.The gondola was being depreciated over a 10-year life using the sum-of-the-years'-digits method.At the beginning of 2016,it was decided to change to straight-line.An accompanying disclosure note would include each of the following except: