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Unformatted text preview: The following are several independent events: 1. Change from the LIFO to the FIFO inventory cost flow assumption. 2. Reduction in remaining service life of machinery from 10 to 8 years. 3. A change from an accelerated method to the straight-line method of depreciating assets. 4. Write-down of inventories because of obsolescence. 5. Receipt of damages won in a court suit instigated five years ago. 6. Recording as an asset costs that were erroneously expensed in a previous period. 7. Write-down of property, plant, and equipment because of closure of inefficient plants. 8. A change from successful efforts to full cost accounting for oil exploration costs. Required Indicate how a company reports the preceding items (specify whether increases or decreases can generally be expected) in its financial statements of the current year. E23-1 Identification and Effects of Changes and Errors Name: An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions. Required Indicate how a company reports the preceding items (specify whether increases or decreases can generally be expected) in its financial statements of the current year. Complete each paragraph by selecting the word, number, or phrase that best fits the corresponding number (you may use an answer more than once). 1.) (1) principle (2) retrospective (3) beginning (4) retained earnings (5) inventory (6) net income (7) assets 2.) (1) estimate (2) periodic (3) book value (4) residual value (5) new (6) no (7) depreciation expense (8) net income (9) assets (10) lower 3.) (1) estimate (2) principle (3) periodic (4) book value (5) residual value (6) current (7) future (8) no (9) depreciation expense (10) remaining 4.) (1) estimate (2) income (3) current (4) decrease (5) current assets 5.) (1) income (2) current (3) income (4) assets 6.) (1) error (2) prior (3) restatement (4) adjustment (5) assets (6) retained earnings (7) more (8) depreciation 7.) (1) estimate (2) impairment (3) current (4) decrease (5) net income 8.) (1) principle (2) retrospective (3) assets (4) retained earnings (5) assets (6) net income (7) higher E23-1 Identification and Effects of Changes and Errors Change in accounting (1) ; (2) adjustment; at the (3) of the period, increase (4) and (5) ; assuming rising costs during the period, (6) and (7) are higher than they otherwise would have been. Change in accounting (1) ; revise (2) depreciation charge based on current (3) , estimated (4) , and (5) estimate of remaining service life for current and future periods; (6) effect at the beginning of the period; (7) is higher and (8) and (9) are (10) than they otherwise would have been in the current period....
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This note was uploaded on 06/26/2011 for the course ACCOUNTING AC300 taught by Professor Jean during the Spring '08 term at Kaplan University.
- Spring '08