The four types of accounting changes, including error correction, are: Code a. C
ID: 2531732 • Letter: T
Question
The four types of accounting changes, including error correction, are:
Code
a. Change in accounting principle.
b. Change in accounting estimate.
c. Change in reporting entity.
d. Error correction.
Instructions
Following are a series of situations. You are to enter a code letter to the left to indicate the type of change. (18 points)
______ 1. Change from presenting nonconsolidated to consolidated financial statements.
______ 2. Change due to charging a new asset directly to an expense account.
______ 3. Change from expensing to capitalizing certain costs, due to a change in periods benefited.
______ 4. Change from FIFO to LIFO inventory procedures.
______ 5. Change due to failure to recognize an accrued (uncollected) revenue.
______ 6. Change in amortization period for an intangible asset.
______ 7. Changing the companies included in combined financial statements.
______ 8. Change in the loss rate on warranty costs.
______ 9. Change due to failure to recognize and accrue income.
______ 10. Change in residual value of a depreciable plant asset.
______ 11. Change from an unacceptable to an acceptable accounting principle.
______ 12. Change in both estimate and acceptable accounting principles.
______ 13. Change due to failure to recognize a prepaid asset.
______ 14. Change from straight-line to sum-of-the-years'-digits method of depreciation.
______ 15. Change in life of a depreciable plant asset.
______ 16. Change from one acceptable principle to another acceptable principle.
______ 17. Change due to understatement of inventory.
______ 18. Change in expected recovery of an account receivable.
Explanation / Answer
1. c
2. d
3. b
4. a
5. d
6. b
7. c
8. b
9. d
10. b
11. d
12. b
13. d
14. b
15. b
16. a
17. d
18. b
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