If a company has discontinued operations, depreciation must still be taken on the assets held for sale. True False
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1 If a company has discontinued operations,
| True | |
| False |
2 The fiscal year-end that a company chooses will likely be influenced most by the company's business cycle.
| True | |
| False |
3 The accounting treatment for an error or omission is a retrospective adjustment with restatement.
| True | |
| False |
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- Which of the following statements regarding accounting change is correct? a. Change in depreciation method is accounted for as a change in accounting policy. b. Change in accounting estimate is accounted for in current and future periods. c. The categories of accounting changes are change in accounting estimate and correction of prior period error. d. A switch from the direct write-off method to the allowance method of accounting for bad debts is an example of change in accounting policy.Which of the following is not a characteristic of non-counterbalancing error? a. If not detected, this is not automatically corrected in the next accounting period. b. The income statement of the period in which the non-counterbalancing error is committed is misstated. c. The statement of financial position of the year of non-counterbalancing error and succeeding statement of financial position are incorrect until the error is corrected. d. If the net income of one year is understated due to non-counterbalancing error, the net income of subsequent year is also affected.Change in Accounting Policy, Change in Estimate, Correction of Error For each of the following situations, identify whether the situation should be considered a change in estimate, change in policy, or correction of an error. Identify also whether the required adjustment should be made retrospectively or prospectively. 1. The benefits received from a piece of equipment were determined to be different than originally anticipated, so the company changed from straight-line depreciation to double- declining balance. 2. In the past, the company used the cash basis of accounting, but this year is switching to the accrual basis of accounting. 3. The company decided that using the average cost method to value inventory would be reliable and more relevant than the FIFO method currently used. 4. The anticipated residual value of a piece of equipment was deemed to be not as large as originally estimated.
- 1.Provide an argument explaining why expenses that were inadvertently omitted in a previous year should be debited directly to retained earnings in the following period in which the error is discovered, rather than recognising them in the profit or loss in the period when the error was discovered.Which of the following would NOT be reflected in the income statement? Group of answer choices A.Correction of an error in previously issued financial statements B.Loss on disposal of a segment of a business C.Cumulative effect of a change in depreciation methods D.An extraordinary itemIf the income statement error is discovered in a subsequent accounting period, what action is to be done by the entity? Group of answer choices a. Reclassify the item to its proper nominal account and restate the income statement of the prior year affected by the error. b. Restate the income statement of the prior year affected by the error. c. No reclassifying entry is necessary but restate the income statement of the prior year affected by the error. d. Reclassify the item to its proper nominal account. Recording of next year's sales as sales of the current year will Group of answer choices a. overstate net income of next year b. not affect retained earnings at the end of next year c. understate retained earnings at the end of the current year d. understate net income of the current year
- When a company changes from the straight-line method of depreciation for previously recorded assets to the double declining balance method, which of the following should be reported?Cumulative effects of change in accounting principle, Pro forma effects of retroactive applicationa. No Nob. No Yesc. Yes Yesd. Yes NoA 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 change1. An entity made a very large arithmetical error in the calculation of depreciation. The correction of the error when discovered in the next year should be treated as Choices; A prior period adjustment Other expense for the year when the error was made. An increase in depreciation expense for the year when the error is discovered. A component of income for the year when the error is discovered but separately reported. 2. Items directly affecting Retained Earnings include all of the following Except Choices; Non-Current asset held for sale Prior period errors and Effect of change in accounting policy. Dividends declared Appropriation of retained earnings
- ) A company has decided to change its depreciation method to better reflect the pattern of use ofits equipment.Which of the following correctly reflects what this change represents and how it should beapplied?A It is a change of accounting policy and must be applied prospectivelyB It is a change of accounting policy and must be applied retrospectivelyC It is a change of accounting estimate and must be applied retrospectivelyD It is a change of accounting estimate and must be applied prospectivelyWhich one of the following items is not included in the determination of income from continuing operations? a. Discontinued operations. b. Restructuring costs. c. Long-lived asset impairment loss. d. Unusual loss from a write-down of inventory.The Typhoon Company discovers an understatement of depreciation in a prior year. What are the components of the journal entry required in the current year to correct this error? Select one: O a A debit to Depreciation Expense and a credit to Accumulated Depreciation O b. A debit to Retained Earnings and a credit to Depreciation Expense CA debit to Retained Earnings and a credit to Accumulated Depreciation Od A debit to Depreciation Expense and a credit to Retained Earnings Oe. A debit to Accumulated Depreciation and a credit to Depreciation Expense Clear my choice
