What effect does this error have on reported ni for

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What effect does this error have on reported NI for 2011?. What entry should be made to correct for this error, assuming the books are not closed for 2011? This error has no effect on net income because both purchases and inventory were understated. The entry to correct for this error, assuming a periodic inventory system, is: Purchases .................................................................. 13,000 Accounts Payable ................................................ 13,000 Q23 Briefly describe some of the similarities and differences between US GAAP and iGAAP. As indicated in the chapter, the FASB has issued guidance on changes in accounting principles, changes in estimates, and corrections of errors, which essentially converges U.S. GAAP to IAS 8. Key remaining differences are as follows. One area in which iGAAP and U.S. GAAP differ is the reporting of error corrections in previously issued financial statements. While both GAAPs require restatement, U.S. GAAP is an absolute standard—that is, there is no exception to this rule. Under U.S. GAAP and iGAAP, if determining the effect of a change in accounting principle is considered impracticable, then a company should report the effect of the change in the period in which it believes it practicable to do so, which may be the current period. Under iGAAP, the impracticality exception applies to both changes in accounting principles and to the correction of errors. Under U.S. GAAP, this exception only applies to changes in accounting principle.
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IAS 8 does not specifically address the accounting and reporting for indirect effects of changes in accounting principles. As indicated in the chapter, U.S. GAAP has detailed guidance on the accounting and reporting of indirect effects. Q24. How might differences in presentation of comparative data under US and iGAAP affect adoption of comparative data under US and iGAAP affect adoption of iGAAP by US companies? Currently, under U.S. GAAP, when a company prepares financial statements on a new basis, comparative information must be provided for a three-year period. Under iGAAP, up to two years of comparative data must be provided. Use of the shorter comparative data period must be addressed before U.S. companies can adopt iGAAP.
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E 15 The first audit of Fenimore Co was made for the year 2010. Auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. 1. At the beginning of 2008, co purchased a machine for $510,000 (salvage $51,000) useful life 5 yrs. Used SL depreciation, but failed to deduct the salvage value in computing the depreciation base for the 3 yrs. 2. At end of 2009, Co failed to accrue sales salaries of $45,000. 3. Tax lawsuit that involved year 2008 was settled late in 2010. Determined that Co owed an additional $85,000 in taxes related to 2008. Co did not record a liability in 2008 or 2009 because the possibility of loss was considered remote, and debited the $85,000 to a loss account in 2010 and credited Cash.
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  • Spring '10
  • George
  • Accounting, ........., Generally Accepted Accounting Principles

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