acct ch 22 part 1

10 terms by Jgrad

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Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of

consistency

Which of the following is not treated as a change in accounting principle?

A change to a different method of depreciation for plant assets

Which of the following is not a retrospective-type accounting change?

Sum-of-the-years'-digits method to the straight-line method

Which of the following is accounted for as a change in accounting principle?

A change in inventory valuation from average cost to FIFO

A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a

credit to Accumulated Depreciation.

Which of the following disclosures is required for a change from sum-of-the-years-digits to straight-line?

Recomputation of current and future years' depreciation

A company changes from percentage-of-completion to completed-contract, which is the method used for tax purposes. The entry to record this change should include a

debit to Retained Earnings in the amount of the difference on prior years, net of tax.

Which of the following disclosures is required for a change from LIFO to FIFO?

The cumulative effect on prior years, net of tax, in the current retained earnings statement.

The justification for the change.

Restated prior year income statements.

All of these are required.

Stone Company changed its method of pricing inventories from FIFO to LIFO. What type of accounting change does this represent?

A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be presented as previously reported.

Which type of accounting change should always be accounted for in current and future periods?

Change in accounting estimate

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