Ch 22 - Name: Status : Score: Instructions: Test Accounting...

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Name: Test Accounting Changes and Error Analysis --- Stec Status : Completed Score: 190 out of 200 points Instructions: Question 1 Multiple Choice 10 of 10 points On January 1, 2005, Wintz Corporation acquired machinery at a cost of $600,000. Wintz adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2008, a decision was made to change to the double-declining balance method of depreciation for this machine. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, is Selected Answer: $0. Question 2 Multiple Choice 10 of 10 points An example of a correction of an error in previously issued financial statements is a change Selected Answer: from the cash basis of accounting to the accrual basis of accounting. Question 3 Multiple Choice 10 of 10 points On December 31, 2008 Kean Company changed its method of accounting for inventory from weighted average cost method to the FIFO method. This change caused the 2008 beginning inventory to increase by $420,000. The cumulative effect of this accounting change to be reported for the year ended 12/31/08, assuming a 40% tax rate, is Selected Answer: $252,000. Question 4 Multiple Choice 10 of 10 points Changing the cost or equity method of accounting for investments is an example of a change in reporting entity. Selected Answer: True Question 5 Multiple Choice 10 of 10 points Friend Co. began operations on January 1, 2007. Financial statements for 2007 and 2008 con- tained the following errors: In addition, on December 31, 2008 fully depreciated equipment was sold for $28,800, but the sale was not recorded until 2009. No corrections have been made for any of the errors. Ignore income tax considerations The total effect of the errors on the amount of Friend's working capital at December 31, 2008 is understated by Selected Answer: $184,800.
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Question 6 Multiple Choice 10 of 10 points Rice Co. purchased machinery that cost $810,000 on January 4, 2006. The entire cost
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Ch 22 - Name: Status : Score: Instructions: Test Accounting...

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