CHAPTER 4 SOLUTIONS.docx - CHAPTER 4 SOLUTIONS Questions...

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CHAPTER 4 SOLUTIONS Questions 16. (a) The remaining book value of the equipment should be depreciated over the remainder of the five-year period. The additional depreciation ($425,000) is not a correction of an error and is not shown as an adjustment to retained earnings. The change is considered a change in estimate. (b) The loss should be shown in the other expenses and losses section of the income statement. (c) The write-off should be shown as other expenses and losses in the income statement. (d) A correction of an error should be considered a prior period adjustment and the beginning balance of Retained Earnings should be restated, if material. (e) The cumulative effect of the change is reported as an adjustment to beginning retained earnings. Prior years’ statements are recast on a basis consistent with the new standard. 17. (a) Other expenses and losses section. (b) Other expenses and losses section. (c) Operating expense section, as a selling expense, but sometimes reflected as an administrative expense.
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