Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Textbook Question
Chapter 22, Problem 4MC
A change in the expected service life of an asset arising because additional information has been obtained is:
- a. an accounting change that should be reported by restating the financial statements of all prior periods represented
- b. an accounting change that should be reported in the period of change and future periods if the change affects both
- c. a correction of an error
- d. not an accounting change
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Explain the adjustments that may be made for the accounting discretions about the following:
Abnormal charges to the accounts
Asset revaluations
Intangibles
An example of a correction of an error is a change:
a. From FIFO inventory valuation to the average method
b. In the service life of property, plant and equipment
c. From cash basis to accrual basis of accounting
d. In the tax assessment related to a prior period
The following statements relate to the depreciation of property, plant and equipment. Which statement is incorrect?
A. the change in the expected pattern of consumption of economic benefits of a depreciation asset should be accounted for as a change in accounting policy and the effect is included in retained earnings.
b. The change in the expected pattern of consumption of economic benefits of a depreciable asset should be accounted for as a change in accounting estimate and the effect is included in the determination of income or loss in the period of change and future periods.
c The sum of unit method results in a charge based on the expected use or output of the asset
D The useful life of an Item of property, plant and equipment should be reviewed periodically and it expectations are significantly different from previous estimates the depreciation charge for the current and future periods should be adjusted
Chapter 22 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 22 - Prob. 1GICh. 22 - Prob. 2GICh. 22 - Prob. 3GICh. 22 - What steps are necessary to apply the...Ch. 22 - Prob. 5GICh. 22 - Prob. 6GICh. 22 - Prob. 7GICh. 22 - Prob. 8GICh. 22 - Define a change in estimate. What is the proper...Ch. 22 - Prob. 10GI
Ch. 22 - How is a change in depreciation method accounted...Ch. 22 - Describe a change in a reporting entity. How does...Ch. 22 - Prob. 13GICh. 22 - Prob. 14GICh. 22 - Prob. 15GICh. 22 - Prob. 16GICh. 22 - Prob. 17GICh. 22 - Prob. 18GICh. 22 - Prob. 19GICh. 22 - Prob. 20GICh. 22 - The cumulative effect of an accounting change...Ch. 22 - When a change in accounting principle is made...Ch. 22 - Prob. 3MCCh. 22 - A change in the expected service life of an asset...Ch. 22 - During 2019, White Company determined that...Ch. 22 - Generally, how should a change in accounting...Ch. 22 - On January 2, 2017, Garr Company acquired...Ch. 22 - A company has included in its consolidated...Ch. 22 - Shannon Corporation began operations on January 1,...Ch. 22 - Shannon Corporation began operations on January 1,...Ch. 22 - Prob. 1RECh. 22 - Heller Company began operations in 2019 and used...Ch. 22 - Refer to RE22-2. Assume the pretax cumulative...Ch. 22 - Refer to RE22-2. Assume Heller Company had sales...Ch. 22 - Bloom Company had beginning unadjusted retained...Ch. 22 - Suppose that Blake Companys total pretax...Ch. 22 - Bliss Company owns an asset with an estimated life...Ch. 22 - At the end of 2019, Framber Company received 8,000...Ch. 22 - At the end of 2019, Cortex Company failed to...Ch. 22 - At the end of 2019, Jayrad Company paid 6,000 for...Ch. 22 - At the end of 2019, Manny Company recorded its...Ch. 22 - Abrat Company failed to accrue an allowance for...Ch. 22 - The following are independent events: a. Changed...Ch. 22 - Prob. 2ECh. 22 - The following are independent events: a. A...Ch. 22 - Change in Inventory Cost Flow Assumption At the...Ch. 22 - Fava Company began operations in 2018 and used the...Ch. 22 - Berg Company began operations on January 1, 2019,...Ch. 22 - Prob. 7ECh. 22 - In 2020, Frost Company, which began operations in...Ch. 22 - Gundrum Company purchased equipment on January 1,...Ch. 22 - Prob. 10ECh. 22 - On January 1, 2014, Klinefelter Company purchased...Ch. 22 - The following are independent errors made by a...Ch. 22 - The following are independent errors made by a...Ch. 22 - Refer to the information in E22-13. Required:...Ch. 22 - The following are independent errors: a. In...Ch. 22 - Dudley Company failed to recognize the following...Ch. 22 - Prob. 1PCh. 22 - Prob. 2PCh. 22 - Koopman Company began operations on January 1,...Ch. 22 - Schmidt Company began operations on January 1,...Ch. 22 - Prob. 5PCh. 22 - Kraft Manufacturing Company manufactures two...Ch. 22 - Jackson Company has decided to issue common stock...Ch. 22 - At the beginning of 2020, Holden Companys...Ch. 22 - At the end of 2020, while auditing Sandlin...Ch. 22 - At the beginning of 2020, Tanham Company...Ch. 22 - A review of Anderson Corporations books indicates...Ch. 22 - Prob. 12PCh. 22 - Gray Companys financial statements showed income...Ch. 22 - Prob. 14PCh. 22 - There are three types of accounting changes:...Ch. 22 - Prob. 2CCh. 22 - Berkeley Company, a manufacturer of many different...Ch. 22 - When the FASB issues a new generally accepted...Ch. 22 - It is important in accounting theory to be able to...Ch. 22 - Prob. 6CCh. 22 - Prob. 7CCh. 22 - Prob. 8CCh. 22 - Prob. 9CCh. 22 - Sometimes a business entity may change its method...
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- Sometimes financial statements contain errors. What type of liabilities may need correction as a prior period adjustment?arrow_forwardGiven the dual effects of accountable events, an decrease in an asset cannot possibly be accompanied by a (an): A. Decrease in liability B. Increase in owner's equity C. Increase in an asset D. Increase in expensearrow_forwardThe analysis is most sensitive to changes in which component? a. Annual Revenue b. Initial Investment c. Salvage Value d. Cannot be determined from the information givenarrow_forward
- Explain the accounting treatment in the event that an impairment review of a non-current asset which has been previously revalued with a revaluation surplus revealed that the non-current asset has suffered an impairment loss.arrow_forwardWhich of the following is not a factor that limits the service life of an asset? a. Operational use b. Adequacy c. Deterioration as a function of time d. Obsolescencearrow_forwardWhich of the following approaches is used to determine the recognition of an impairment loss of financial assets? Select the best answer. a. O An approach that reflects the losses expected over the contractual life of the asset b. A loan is impaired if it is more likely than not that a creditor will be unable to collect all amounts due. c. A dual-measurement expected credit loss approach that is based on a financial asset's credit risk at inception and changes in credit risk from inception, as well as the applicability of certain practical expedients d. O Present value of contractual cash flows approacharrow_forward
- Which statement about depreciation is false?a. A major objective of depreciation accounting is to allocate the cost of using an assetagainst the revenues it helps to generate.b. Depreciation should not be recorded in years in which the market value of the asset hasincreased.c. Obsolescence as well as physical wear and tear should be considered when determiningthe period over which an asset should be depreciated.d. Depreciation is a process of allocating the cost of an asset to expense over its usefullife.arrow_forwardThere are various types of accounting changes, each of which is required to be reported differently.Required:1. What type of accounting change is a change from the sum-of-the-years’-digits method of depreciation to thestraight-line method for previously recorded assets as a result of new information related to production patterns? Under what circumstances does this type of accounting change occur?2. What type of accounting change is a change in the expected service life of an asset arising because of moreexperience with the asset? Under what circumstances does this type of accounting change occur?arrow_forwardWhen the estimate of an asset's useful life is changed, select the false statement a. depreciation expense for all past periods must be recalculated. b. there is a change in the amount of depreciation expense recorded for future years. c. only the depreciation expense in the remaining years is changed. d. None of the above is truearrow_forward
- Accounting is not as precise and objective as it is sometimes portrayed as being. There are areas where subjective judgement required. What judgements must be made to calculate a depreciation expense for a period?arrow_forwardWhich of the following is a false statement regarding revaluation of PPE?A. Revalued amount is either fair value or depreciated replacement cost.B. If simultaneous revaluation is not possible, revaluation can be done on arolling basis provided revaluation of the class of assets is completed withina short period of time and provided the revaluations are kept up to date.C. The difference between the PPE’s carrying amount and its revalued amount isknown as revaluation surplus and should be presented in the statement ofcomprehensive income, net of applicable tax.D. When an asset's carrying amount is increased as a result of revaluation, theincrease shall always be credited to revaluation surplus regardless of theexistence of previous impairment loss recognized. Which of the following should be included as cost of inventory?A. Depreciation expense of the delivery equipment.B. Depreciation expense of the factory machinery.C. Storage cost of finished goods.D. None from the choices. In…arrow_forwardDirection: Choose the correct answer. 1. A provision is a. An event which is not recognized because it is not probable or cannot be measured reliably b. An event which is probable and measurable c. An event which is probable, possible or remote and measurable. d. An evet which is probable but not measurable. 2.Which of the following statements is true? a. Vested and unvested past service cost shall be amortized over the remaining vesting period. b. Vested past service cost shall be recognized as expense and unvested past service cost shall be amortized over the remaining vesting period. c. Vested and unvested past service cost shall be recognized in retained earnings d. Vested and unvested past service cost shall be expense immediately. 3. In computing basic earning per share, an entity would include which of the following? a. Dividends on nonconvertible cumulative preference shares b. Dividend on ordinary shares c. Interest on convertible bonds d. Number of nonconvertible…arrow_forward
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