Chapter 22 ACCOUNTING CHANGES AND ERROR ANALYSIS

Chapter 22 ACCOUNTING CHANGES AND ERROR ANALYSIS - Chapter...

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Chapter 22: ACCOUNTING CHANGES AND ERROR ANALYSIS 1. Which of the following should be reported as a prior period adjustment? Change in Change from Estimated Lives Unaccepted Principle of Depreciable Assets to Accepted Principle a. Yes Yes b. No Yes c. Yes No d. No No 2. On December 31 , 2008 , Ellworth, Inc. appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial statement and income tax purposes. The change will result in a $1,500,000 increase in the beginning inventory at January 1, 2008 . Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is a. $0. b. $450,000. c. $1,050,000. d. $1,500,000. 3. On January 1, 2008 , Bosco Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in an $800,000 increase in the January 1, 2008 inventory. Assume that the income tax rate for all years is 30%. The cumulative effect of the accounting change should be reported by Bosco in its 2008 a. retained earnings statement as a $560,000 addition to the beginning balance.
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Chapter 22 ACCOUNTING CHANGES AND ERROR ANALYSIS - Chapter...

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