Question 1

The accounting changes identified by current GAAP include all of the following except

Accepted Answer

A)  correction of an error 
B)  change in accounting principle 
C)  change in accounting estimate 
D)  change in reporting entity 
A)  correction of an error 
B)  change in accounting principle 
C)  change in accounting estimate 
D)  change in reporting entity

Question 2

What is the difference between counterbalancing errors and noncounterbalancing errors?

Accepted Answer

A counterbalancing error is on

Question 3

The Jessica Co. has the following errors on its books as of December 31, 2016. The books for 2016 have not yet been closed. 
a.On January 1, 2014, a machine had been purchased for $6,500. The machine had an estimated life of five years, but it was expensed in error. Straight-line depreciation with no salvage value should have been used.
b.On January 1, 2015, the company bought a four-year insurance policy for $800 and immediately charged the full premium to expense.
 Required:
Prepare journal entries to correct these errors on December 31, 2016. Ignore income taxes.

Accepted Answer

The answer of The Jessica Co. has the following errors...

Question 4

A retrospective adjustment requires a change in the

Accepted Answer

A)  prior period financial statements to look like the current period financial statements 
B)  current period income to reflect the cumulative effect of new method 
C)  prior period financial statements to reflect how they would have been presented had the new method been used in prior periods 
D)  current period accounts in the financial statements to what they would have been had the previous method been used in the current period 
A)  prior period financial statements to look like the current period financial statements 
B)  current period income to reflect the cumulative effect of new method 
C)  prior period financial statements to reflect how they would have been presented had the new method been used in prior periods 
D)  current period accounts in the financial statements to what they would have been had the previous method been used in the current period

Question 5

Change in an accounting principle is accounted for

Accepted Answer

A)  prospectively 
B)  by a prior period adjustment 
C)  by a retrospective application of a new accounting principle 
D)  by constructive application of a new accounting principle 
A)  prospectively 
B)  by a prior period adjustment 
C)  by a retrospective application of a new accounting principle 
D)  by constructive application of a new accounting principle

Question 6

Walter Co. made the following errors in 2014: Ending inventory was overstated by $2,000.
Beginning inventory was understated by $6,000.
Purchases were overstated by $3,000.
 Reported net income was $20,000. The correct 2014 net income was

Accepted Answer

A)  $19,000 
B)  $21,000 
C)  $15,000 
D)  $ 4,000 
A)  $19,000 
B)  $21,000 
C)  $15,000 
D)  $ 4,000

Question 7

On January 1, 2014, Margo Company acquired machinery at a cost of $160,000. This machinery was being depreciated by the double-declining-balance method over an estimated life of five years with no salvage value. At the beginning of 2016, Margo changed to and could justify straight-line depreciation. Margo's tax rate is 30 percent. The depreciation expense to be included in 2016 net income was

Accepted Answer

A)  $ 7,200 
B)  $24,000 
C)  $19,200 
D)  $38,400 
A)  $ 7,200 
B)  $24,000 
C)  $19,200 
D)  $38,400

Question 8

When disclosing the impact of a retrospective adjustment for the change from LIFO to FIFO in 2015, which of the following impacts is not expected to be reported in the comparative financial statements when two-year comparative statements are presented?

Accepted Answer

A)  impact on beginning inventory for 2014 
B)  impact on 2014 net income 
C)  impact on ending inventory for 2015 
D)  impact on cost of goods sold for 2014 
A)  impact on beginning inventory for 2014 
B)  impact on 2014 net income 
C)  impact on ending inventory for 2015 
D)  impact on cost of goods sold for 2014

Question 9

What is the GAAP requirement of accounting for a change in estimates?

Accepted Answer

GAAP requires a company to account for a

Question 10

The mandatory adoption of a new accounting principle as a result of a new FASB statement requires

Accepted Answer

A)  footnote disclosure only 
B)  a cumulative effect adjustment 
C)  retrospective adjustment 
D)  prospective restatement 
A)  footnote disclosure only 
B)  a cumulative effect adjustment 
C)  retrospective adjustment 
D)  prospective restatement

Question 11

Several errors are listed below.  
 Required:
Indicate the effect each error would have on 2015 net income by placing a plus sign (+), minus sign (-) or NI (no impact) in the space provided. Part (a) has been completed as an example.

Accepted Answer

@#IMG-DLM&_TB6205_00

Question 12

Current GAAP defines three types of changes: 
a.Changes in accounting principle
b.Changes in accounting estimate
c.Changes in reporting entity
Define each item, give an example, and describe how it should be accounted for.

Accepted Answer

a.A change in accounting principle occur

Question 13

What is a change in reporting entity and how is an adjustment handled?

Accepted Answer

A change in reporting entity occurs when

Question 14

Exhibit 22-2 On January 1, 2015, Nathan, Inc. purchased a machine for $56,000. Eight-year, straight-line depreciation with no salvage value was used through December 31, 2016. On January 1, 2017, it was estimated that the total useful life of the machine from acquisition date was ten years.

-Refer to Exhibit 22-2. The adjusting entry that should be made on January 1, 2017, will be in the amount of

Accepted Answer

A)  $6,000 
B)  $3,600 
C)  $2,400 
D)  $ 0 
A)  $6,000 
B)  $3,600 
C)  $2,400 
D)  $ 0

Question 15

On January 1, 2014, Roy Company acquired equipment at a cost of $500,000. Roy used the double-declining-balance method to depreciate the equipment with a ten-year life and no salvage value. On January 1, 2016, Roy changed to straight-line depreciation for this equipment, and the IRS accepted this change as being eligible as a change in accounting estimate with prospective treatment. Assuming an income tax rate of 30%, the restatement of January 1, 2016 retained earnings is

Accepted Answer

A)  $ 0 
B)  $54,800 
C)  $62,640 
D)  $82,100 
A)  $ 0 
B)  $54,800 
C)  $62,640 
D)  $82,100

Question 16

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 17

In 2016, Bevins Company decided to change from LIFO to FIFO due to better representation of the flow of inventory and costs. Bevins started the business in 2014. Bevin's tax rate is 35%. The following analysis was provided by management:   Required:
1) Prepare the journal entry necessary to record the change.
2) What amount of net income would Bevins report in 2014, 2015, and 2016?

Accepted Answer

The answer of In 2016, Bevins Company decided to change...

Question 18

A change in a reporting entity is accounted for by a prospective adjustment so that all the future financial statements are presented consistently.

Accepted Answer

A) True 
 B)False

Question 19

On January 1, 2014, the Master Company purchased a machine for $36,000 that had a ten-year estimated useful life and no estimated salvage value. At the start of the seventh year of use, a new energy saving device was added to the machine that extended its original useful life an additional two years. This change should be accounted for in the seventh year by

Accepted Answer

A)  including the cumulative effect of the change in net income for the current period 
B)  depreciating the remaining book value over four years 
C)  retroactively adjusting income of prior periods using the newly adjusted useful life 
D)  depreciating the remaining book value over six years 
A)  including the cumulative effect of the change in net income for the current period 
B)  depreciating the remaining book value over four years 
C)  retroactively adjusting income of prior periods using the newly adjusted useful life 
D)  depreciating the remaining book value over six years

Question 20

A change in accounting principle because an Accounting Standard Update has been issued and the former principle is no longer generally accepted is treated under the prospective method.

Accepted Answer

A) True 
 B)False

The accounting changes identified by current GAAP include all of the following except

What is the difference between counterbalancing errors and noncounterbalancing errors?

A retrospective adjustment requires a change in the

Change in an accounting principle is accounted for

Walter Co. made the following errors in 2014: Ending inventory was overstated by $2,000. Beginning inventory was understated by $6,000. Purchases were overstated by $3,000. Reported net income was $20,000. The correct 2014 net income was

When disclosing the impact of a retrospective adjustment for the change from LIFO to FIFO in 2015, which of the following impacts is not expected to be reported in the comparative financial statements when two-year comparative statements are presented?

What is the GAAP requirement of accounting for a change in estimates?

The mandatory adoption of a new accounting principle as a result of a new FASB statement requires

Several errors are listed below. Required: Indicate the effect each error would have on 2015 net income by placing a plus sign (+), minus sign (-) or NI (no impact) in the space provided. Part (a) has been completed as an example.

Current GAAP defines three types of changes: a.Changes in accounting principle b.Changes in accounting estimate c.Changes in reporting entity Define each item, give an example, and describe how it should be accounted for.

What is a change in reporting entity and how is an adjustment handled?

Which of the following is a counterbalancing error?

A change in a reporting entity is accounted for by a prospective adjustment so that all the future financial statements are presented consistently.

A change in accounting principle because an Accounting Standard Update has been issued and the former principle is no longer generally accepted is treated under the prospective method.

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Time Value of Money Module

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Exam 22: Accounting for Changes and Errors

The accounting changes identified by current GAAP include all of the following except

What is the difference between counterbalancing errors and noncounterbalancing errors?

A retrospective adjustment requires a change in the

Change in an accounting principle is accounted for

Walter Co. made the following errors in 2014: Ending inventory was overstated by $2,000. Beginning inventory was understated by $6,000. Purchases were overstated by $3,000. Reported net income was $20,000. The correct 2014 net income was

When disclosing the impact of a retrospective adjustment for the change from LIFO to FIFO in 2015, which of the following impacts is not expected to be reported in the comparative financial statements when two-year comparative statements are presented?

What is the GAAP requirement of accounting for a change in estimates?

The mandatory adoption of a new accounting principle as a result of a new FASB statement requires

Several errors are listed below. Required: Indicate the effect each error would have on 2015 net income by placing a plus sign (+), minus sign (-) or NI (no impact) in the space provided. Part (a) has been completed as an example.

Current GAAP defines three types of changes: a.Changes in accounting principle b.Changes in accounting estimate c.Changes in reporting entity Define each item, give an example, and describe how it should be accounted for.

What is a change in reporting entity and how is an adjustment handled?

Which of the following is a counterbalancing error?

A change in a reporting entity is accounted for by a prospective adjustment so that all the future financial statements are presented consistently.

A change in accounting principle because an Accounting Standard Update has been issued and the former principle is no longer generally accepted is treated under the prospective method.

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Time Value of Money Module

Filters