Exam 20: Accounting Changes

Indicate the nature of each of the situations described below using the following three-letter code. CODE DESCRIPTION CPR: Change in principle reported retrospectively CPP: Change in principle reported prospectively CES: Change in estimate CRE: Change in reporting entity PPA: Prior period adjustment required ____ Change from FIFO inventory costing to LIFO inventory costing. ____ Change from LIFO inventory costing to FIFO inventory costing. ____ Change in the composition of a group of firms reporting on a consolidated basis. ____ Change to the installment method of accounting for receivables. ____ Change in actuarial assumptions for a defined benefit pension plan. ____ Change from sum-of-the-years' digits depreciation to straight-line. ____ Change from expensing extraordinary repairs erroneously recorded as an expense to capitalizing the expenditures. ____ Change in the percentage used to determine warranty expense. ____ Change from reporting the equity method for investments to the cost method. ____ Change in the residual value of machinery.

When the retrospective approach is used for a change to the FIFO method,which of the following accounts is usually not adjusted?

Moonland Company's income statement contained the following errors: Ending inventory,December 31,2016,understated by $6,000 Depreciation expense for 2016 overstated by $1,000 What is the effect of the errors on 2016 net income before taxes?

On January 2,2016,Tobias Company began using straight-line depreciation for a certain class of assets.In the past,the company had used double-declining-balance depreciation for these assets.As of January 2,2016,the amount of the change in accumulated depreciation is $40,000.The appropriate tax rate is 40%.The separately reported change in 2016 earnings is:

Powell Company had the following errors over the last two years: 2014: Ending inventory was overstated by $30,000 while depreciation expense was overstated by $24,000. 2015: Ending inventory was understated by $5,000 while depreciation expense was understated by $4,000. By how much should retained earnings be adjusted on January 1,2016? (Ignore taxes)

Early in 2016,Benton Well Supplies discovered that a five-year insurance premium payment of $50,000 at the beginning of 2013 was debited to insurance expense.The correcting entry would include:

Prior years' financial statements are restated under the:

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

FIFA Footballs acquired a patent in 2013 at a cost of $150 million and amortizes the patent on a straight-line basis.During 2016 management decided that the benefits from the patent would be received over a total period of 8 years rather than the 20-year legal life being used to amortize the cost.FIFA's 2016 financial statements should include:

A company failed to record unrealized gains of $20 million on its trading security investments.Its tax rate is 30%.As a result of this error,total shareholders' equity would be: