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Exam 20: Accounting Changes

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Question 41

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What is the difference between U.S.GAAP and IFRS with regard to the correction of accounting errors?

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When correcting errors in previously iss...

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Question 42

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When an accounting change is reported under the retrospective approach,prior years' financial statements are:

A) Revised to reflect the use of the new principle.
B) Reported as previously prepared.
C) Left unchanged.
D) Adjusted using prior period adjustment procedures.

E) B) and D)
F) All of the above

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Question 43

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How may accounting changes detract from accounting information?

If a change is made from straight-line to SYD depreciation,one should record the effects by a journal entry including:

When an accounting change is reported under the retrospective approach,account balances in the general ledger:

Which of the following would not be accounted for using the prospective approach?

Due to an error in computing depreciation expense,Prewitt Corporation overstated accumulated depreciation by $20 million as of December 31,2016.Prewitt has a tax rate of 30%.Prewitt's retained earnings as of December 31,2016,would be:

Nash Industries changed its method of accounting for warranties from the cash basis to the accrual basis on January 1,2016.The company's accountant determined that a liability of $70,000 should be established.Ignore income taxes. Required: Prepare the journal entry to record the accounting change.

Hepburn Company bought a copyright for $90,000 on January 1,2013,at which time the copyright had an estimated useful life of 15 years.On January 5,2016,the company determined that the copyright would expire at the end of 2021.How much should Hepburn record as amortization expense for this copyright for 2016?

Which of the following changes would not be accounted for using the prospective approach?

In 2016,management discovered that Dual Production had debited expense for the full cost of an asset purchased on January 1,2013,at a cost of $36 million with no expected residual value.Its useful life was 5 years.Dual uses straight-line depreciation.The correcting entry,assuming the error was discovered in 2016 before preparation of the adjusting and closing entries,includes:

Regardless of the type of accounting change that occurs,the most important responsibility is:

JFS Co.changed from straight-line to double-declining-balance depreciation.The journal entry to record the change includes:

We record and report most changes in accounting principle retrospectively,but sometimes report the changes prospectively.Explain when it is appropriate to report the changes prospectively.Provide examples.

Mobic Inc.acquired some manufacturing equipment in January 2013 for $400,000 and depreciated it $40,000 each year for three years on a straight-line basis.During 2016,the manufacturer announced a new technology for this type of equipment that will make the old models obsolete by the end of 2019.As a result,Mobic will plan to replace the equipment at that time,effectively reducing the asset's life from ten to seven years.In its financial statements for 2016,Mobic should:

Johnson Company receives royalties on a patent it developed several years ago.Royalties are 5% of net sales,to be received on September 30 for sales from January through June and receivable on March 31 for sales from July through December.The patent rights were distributed on July 1,2015,and Johnson accrued royalty revenue of $50,000 on December 31,2015,as follows: Johnson received royalties of $65,000 on March 31,2016,and $90,000 on September 30,2016.In December,2016,the patent user indicated to Johnson that sales subject to royalties for the second half of 2016 should be $600,000. Required: Prepare any journal entries Johnson should record during 2016 related to the royalty revenue.

Disclosure notes related to a change in accounting principle under the retrospective approach should include:

Cooper Inc.took physical inventory at the end of 2015.Purchases that were acquired FOB destination were in transit,so they were not included in the physical count.

Gore Inc.recorded a liability in 2016 for probable litigation losses of $2 million.Ultimately,$5 million in legitimate warranty claims were filed by Gore's customers.

Retrospective restatement usually is not used for a: