Ch. 20 Accounting Changes MCQ

Retrospective restatement usually is not used for a:

a. Change in accounting estimate

b. Change in accounting principle

c. Change in entity

d. Correction of error

b. Change in accounting principle

Which of the following changes is not usually accounted for retrospectively?

a. Change from expensing extraordinary repairs to capitalizing expenditures

b. Change from FIFO to LIFO

c. Change in the composition of firms reporting on a consolidated basis

d. Change from LIFO to FIFO

a. Change from expensing extraordinary repairs to capitalizing expenditures

Which of the following is not an example of a change in accounting principle?

a. A change in the useful life of a depreciable asset

b. A change from LIFO to FIFO for inventory costing

c. A change to the full costing method in the extractive industries

d. A change from the cos tmethod to the equity method to the equity method of accounting for investments

a. A change in the useful life of a depreciable asset

B Company switched from the sum-of-the-years-digits depreciation method to traight-line depreciation in 2016. The change affects machinery purchased at the beginning of 2014 at a cost of $72,000. The machinery has an estimated life of five years and an estimated residual value of $3,600. What is B’s 2016 depreciation expense?

a. $9,120

b. $13,680

c. $15,840

d. $19,200

a. $9,120

Depr. method

72,000 - 36,000 × 2 (5+4+3+2+1) = 15 = $9,120

B Company hed from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2016. The change affects machinery purchased at the beginning of 2014 at a cost of $72,000. The machinery has an estimated life of five years and an estimated residual value of $3,600, What is B’s 2016 depreciation expense?

a. $9,120

b. $12,680

c. $15,840

d. $19,200

a. $9,120

Blue Co. has a patent on a communication process. The company has amortized the patent on a straight-line basis since 2012, when it was acquired at a cost of $36 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life beingused to amortize its cost. The decision was made at the end of 3026 (before adjusting and closing entries). What is the appropriate patent amortization expense in 2016?

a. $4 million

b. $5 million

c. $10 million

d. $20 million

c. $10 million

2012-2015: 4 years

Dr. Amortization Expense (4 mil x 4 = 18 mill)

2016: 38-16 = 22 mill/2 = 10

Which of the following is a change in estimate?

a. A change form the full costing method in the extractive industries

b. A change from percentage-of-completion to the completed contract method

c. consolidating a subsidiary for the first time

d. A change in the termination rate of employees under a pension plan

d. A change in the termination rate of employees under a pension plan