acct_253_ch_22.txt

A change that occurs as the result of new information or as additional experience is acquired is a
A. change in accounting principle
B. change in reporting entity
C. change in accounting estimate
D. correction of an error

All of the following are examples of a change in accounting principle except a change from
A. expensing certain expenditures that were immaterial to deferring and amortizing them because they have become material
B. FIFO to average cost
C. the completed contract to percentage of completion method of accounting for construction contracts
D. average cost to LIFO inventory pricing

A switch from the cash basis of accounting to the accrual basis is considered a
A. change in accounting estimate
B. correction of an error
C. change in reporting entity
D. change in accounting principle

Changes in accounting principle are generally accounting for
A. retrospectively
B. currently
C. consistently
D. prospectively

The cumulative effect of a change in accounting principle is reported
A. on the income statement as part of discountinued operations
B. on the retained earnings statement as an adjustment to the beginning balance of the current year
C. on the income statement as an extraordinary item
D. on the retained earnings statement as an adjustment to the beginning balance on the earliest year presented

All of the following situations require the restatement of prior period financial statements except a change
A. in the method of accounting for long-term construction contracts
B. to or from the full cost method of accounting in the extractive industries
C. all of the options require restatement
D. to the LIFO inventory method from another method

Corrections of errors from prior periods are reported
A. as an adjustment of beginning retained earnings of the earliest year presented
B. as an adjustment to the current year's beginning retained earnings
C. as an extraordinary item
D. between extraordinary items and net income on the income statement

The cumulative effect of an accounting change is not computed for a change
A. to the LIFO method from the FIFO method
B. from the LIFO method to the FIFO method
C. to the percentage of completion method from the completed contract method
D. all of the options require computation of the cumulative effect of the change

Changes in estimates must be accounted for
A. retrospectively
B. prospectively
C. consistently
D. currently

Which of the following statements related to changes in estimates is not correct?
A. these changes are viewed as normal recurring corrections and adjustments
B. financial statements of prior periods are not restated
C. pro forma amounts for prior periods are reported
D. opening balances are not adjusted for the change

A change in reporting entity is accounted for
A. propsectively
B. currently
C. consistently
D. retrospectively

All of the following are examples of accounting errors except a
A. change in estimate that occurs due to a clearly unrealistic original estimate
B. misuse of facts
C. all of the options are accounting errors
D. change from an unacceptable accounting principle to an acceptable accounting principle

Corrections of error must be accounted for
A. by showing pro forma data
B. prospectively
C. as prior period adjustments
D. currently

Which of the following is not a reason why companies prefer certain accounting methods?
A. bonus payments
B. political costs
C. asset structure
D. smooth earnings

All of the following involve counterbalancing errors except the
A. failure to record depreciation
B. overstatement of purchases
C. understatement of ending inventory
D. failure to record prepaid expenses

Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of
A. consistency
B. materiality
C. conversatism
D. objectivity

Which of the following is not treated as a change in accounting principle?
A. a change to a different method of depreciation for plant assets
B. a change from LIFO to FIFO for inventory valuation
C. a change from completed contract to precentage of completion
D. an change from full cost to successful efforts in the extractive industry

Which of the following is not a retrospective type accounting change?
A. sum of the years digits method to the straight line method
B. completed contract method to the percentage of completion method for long term contracts
C. full cost method to another method in the extractive industry
D. LIFO method to the FIFO method for invetnroy valuation

Which of he following is accounted for as a change in accounting principle?
A. a change in inventory valuation from average cost to FIFO
B. a chane from expensing immaterial expenditures to deferring and amortizing them as they become material
C. a change from the cash basis of accounting to the accrual basis of accounting
D. a change in the estimated useful life of plant assets

Which of the following disclosures is required for a change from sum of years digits to straight line?
A. all of these are required
B. re-computation of current and future years' depreciation
C. the cumulative effect on prior years, net of tax, in the current retained earnings statement
D. restatement of prior years' income statements

A company changes from percentage of completion to completed contract, which is the method used for tax purposes. The entry to record this change should include a
A. debit to Loss on Long term Contracts in the amount of the difference on prior years, net of tax
B. debit to Construction in Process
C. debit to Retained Earnings in the amount of the difference on prior years, net of tax
D. credit to Deferred Tax Liability

Which of te following disclosures is required for a change from LIFO to FIFO?
A. restated prior year income statements
B. the justification for the change
C. all of these are required
D. the cumulative effect on prior years, net of tax, in the current retained earnings statement

Stone Company changed its method of pricing inventories from FIFO to LIFO. What type of accounting change does this represent?
A. a change in accounting principle for which the financial statements for prior periods included for comparative purposes should be presented as previously reported
B. a change in accounting estimate for which the financial statements for prior periods included for comparative purposes should be presented as previously reported
C. a change in accounting principle for which the financial statements for prior periods included for comaprative purposes should be restated
D. a change in accounting estimate for which the financial statements for prior period included for compatative purposes should be restated

Which type of accounting change should always be accounted for in current and future periods?
A. correction of an error
B. change in accounting estimate
C. change in reporting entity
D. change in accounting principle

Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate?
A. current period and retrospectively
B. current period and prospectively
C. retrospectively only
D. current period only

When a company decides to switch from the double-declining balance method to the straight line method, this change should be handled as a
A. prior period adjustment
B. change in accounting estimate
C. correction of an error
D. change in accounting principle

The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years. Based on this information, the accountant should
A. continue to depreciate the building over the original 50 year life
B. adjust accumulated depreciation to its appropriate balance, through net income, based on a 40 year life, and then depreciate the adjusted book value as thought the estimated life had always been 40 years
C. adjust accumulated depreciation to its appropriate balance through retained earnings, based on a 40 year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years
D. depreciate the remaining book value over the remaining life of the asset

Which of the following statements is correct?
A. prior statements should be restated for changes in accounting estimates
B. a change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate
C. changes in accounting principle are always handled in current or prospective period
D. correction of an error related to prior period should be considered as an adjustment to current year net income

Which of the following describes a change in reporting entity?
A. changing the companies included in combined financial statements
B. a manufacturing company expands its market from regional to nationwide
C. a compnay acquires a subsidiary that is to be accounted for as a purchase
D. a company divests itself of a European branch sales office

An example of a correction of an error in previously issued financial statements is a change
A. from the FIFO method to inventory valuation to the LIFO method
B. from the cash basis of accounting to the accrual basis of accounting
C. in the tax assessment related to a prior period
D. in the service life of plant assets, based on changes in the economic environment