ACCT 313 Ch 22 MC

Which of the following is not considered a direct effect of a change in accounting principle? A. An employee profit-sharing plan based on net income when a company uses the percentage-of-completion method. B. The inventory balance as a result of a change in the inventory valuation method. C. An impairment adjustment resulting from applying the lower-of-cost-or-market-test to the adjusted inventory balance. D. Deferred income tax effects of an impairment adjustment resulting from applying the lower-of-cost-or-market test to the adjusted inventory balance.

A. An employee profit-sharing plan based on net income when a company uses the percentage-of-completion method.

Change from FIFO to weighted-average cost. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

A. Change in an accounting principle

Change from LIFO to FIFO. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

A. Change in an accounting principle

Change to the "full cost" method of accounting by an oil company. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

A. Change in an accounting principle

In 2014 the Flynn Company has changed from the percentage-of-completion method to the completed-contract method for long-term construction contracts. The difference in pre-tax income prior to 2014 is a decrease of $60,000 and for 2014 is a decrease of $20,000. The estimated tax effect is 40%. The journal entry made by Flynn Company should include a: A. Debit to Deferred Tax Liability of $24,000. B. Credit to Deferred Tax Liability of $32,000. C. Debit to Deferred Tax Liability of $32,000. D. Credit to Deferred Tax Liability of $24,000.

A. Debit to Deferred Tax Liability of $24,000.

Change from sum-of-the-years'-digits to straight-line depreciation. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

B. Change in an accounting estimate

Tang Corporation has a change in accounting that requires Tang to restate the financial statements of all prior periods presented and disclose in the year of change the effect on net income and earnings per share data for all prior periods presented. This change is most likely the result of a: A. change in depreciation methods. B. change in accounting estimate. C. change in reporting entity. D. change in estimated recoverable mineral reserves.

C. change in reporting entity.

Change in the percentage applied in the determination of bad debts, resulting from new market research study. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

B. Change in an accounting estimate

Change in the salvage value of machinery due to an increase in the price of scrap metal. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

B. Change in an accounting estimate

Which of the following financial statement characteristics is adversely affected by accounting changes? A. Usefulness. B. Consistency. C. Timeliness. D. Relevance.

B. Consistency.

According to the FASB, which approach is required for reporting changes in an accounting principle? A. Currently B. Retrospectively C. Prospectively D. Futuristically

B. Retrospectively

Change to consolidated financial statements from statements of individual companies. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

C. Change in reporting entity

Changing the companies included in combined financial statements. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

C. Change in reporting entity

Which of the following is a condition in which retrospective application is not impracticable? A. The company cannot determine the effects of retrospective application. B. Retrospective application requires assumptions about management's intent in a prior period. C. The company has changed auditors. D. Retrospective application requires significant estimates for a prior period, and the company cannot objectively verify the necessary information to develop these estimates.

C. The company has changed auditors.

Which of the following is not a change in accounting principle? A. A change from completed-contracts to percentage-of-completion. B. A change from FIFO to average cost. C. Using a different method of depreciation for new plant assets. D. A change from LIFO to FIFO for inventory valuation.

C. Using a different method of depreciation for new plant assets.

A change in accounting principle is evidenced by: A. a change from the historical cost principle to current value accounting. B. adopting the allowance method in estimating bad debts expense when a credit sales policy is instituted. C. changing the basis of inventory pricing from weighted-average cost to LIFO. D. a change from current value accounting to the historical cost principle

C. changing the basis of inventory pricing from weighted-average cost to LIFO.

Schoen Company experienced a change in accounting principle which it accounted for in the following manner: opening balances were not adjusted and no attempt was made to allocate charges or credits for prior events. This method of recording an accounting change is known as handling the change: A. prospectively. B. currently. C. retrospectively. D. haphazardly.

C. retrospectively.

Weaver Company changes from the LIFO method to the FIFO method in 2015. The increase in pre-tax income as a result of the difference in the two methods prior to 2013 is $ 100,000 and for the year 2013 is $40,000 and for the year 2014 is $30,000. The estimated tax effect is 40%. The entry to record the change at the beginning of 2014 should include. A. A debit to Deferred Tax Liability of $68,000. B. A credit to Deferred Tax Liability of $68,000. C. A debit to Deferred Tax Liability of $56,000. D. A credit to Deferred Tax Liability of $56,000.

D. A credit to Deferred Tax Liability of $56,000.

Change from the cash basis of accounting to the accrual basis. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

D. Correction of an error

Change from the current value approach to the historical cost approach in accounting for plant assets. A. Change in an accounting principle B. Change in an accounting estimate C. Change in reporting entity D. Correction of an error

D. Correction of an error

The general rule for differentiating between a change in an estimate and a correction of an error is: A. based on the materiality of the amounts involved. Material items are handled as a correction of an error, whereas immaterial amounts are considered a change in an estimate. B. if a generally accepted accounting principle is involved, it's usually a change in an estimate. C. if a generally accepted accounting principle is involved, it's usually a correction of an error. D. a careful estimate that later proves to be incorrect should be considered a change in an estimate.

D. a careful estimate that later proves to be incorrect should be considered a change in an estimate.

Changing specific subsidiaries that constitute the group of companies for which consolidated financial statements are prepared is an example of a: A. change in accounting estimate. B. change in accounting principle. C. change in segment reporting. D. change in reporting entity.

D. change in reporting entity.

A company that reports changes retrospectively would: A. report the cumulative effect in the current year's income statement as an irregular item. B. not change any prior-year financial statements. C. make changes prospectively. D. show any cumulative effect of the change as an adjustment to beginning retained earnings of the earliest year presented.

D. show any cumulative effect of the change as an adjustment to beginning retained earnings of the earliest year presented.