acct chp 22 part 2

10 terms by Jgrad

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Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate?

Current period and prospectively

When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a

change in accounting estimate.

The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years. Based on this information, the accountant should

depreciate the remaining book value over the remaining life of the asset.

Which of the following statements is correct?

A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate.

Which of the following describes a change in reporting entity?

Changing the companies included in combined financial statements.

Presenting consolidated financial statements this year when statements of individual companies were presented last year is

an accounting change that should be reported by restating the financial statements of all prior periods presented.

An example of a correction of an error in previously issued financial statements is a change

from the cash basis of accounting to the accrual basis of accounting.

Counterbalancing errors do not include

errors that correct themselves in three years.

A company using a perpetual inventory system neglected to record a purchase of merchandise on account at year end. This merchandise was omitted from the year-end physical count. How will these errors affect assets, liabilities, and stockholders' equity at year end and net income for the year?

Assets (Understate)

Liabilities (Understate)

Stockholders' Equity (No effect )

Net Income (No effect )

If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not record the purchase of these goods in its accounting records, these errors would cause

no effect on net income, working capital, and retained earnings.

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