ssignment SCREEN PRINTER VENSON BAC CES The following are various types of accou
ID: 2558748 • Letter: S
Question
ssignment SCREEN PRINTER VENSON BAC CES The following are various types of accounting changes: For each change or error, indicate how it would be accounted for assuming the company follows IFRS Accounting Treatment Acounted for is tha currant year anly 1. Change in a plant asset's residual value 2. Change due to an overstatement of inventory (in the preceding period) Change from sum-of-the-years-digits to straight-line method of deprediation because of a change in the pattern of benefits received 3. Accounted for in the current year enty Change in a primary source of GAAP Decision by management to capitalize interest. The company is reporting a self 4. Accounted for In the current year only 5. constructed asset for the first time. 6. Change in the rate used to calculate warranty costs 7. Change from an unacceptable accounting poliky to an acceptable accounting policy 8. Change in a patent's amortization period 9. Change from the zero-profit method to the percentage-of-completion method on construction contracts. This change was a result of experience with the project and improved ability to estimate the costs to completion and therefore the percentage Recognition of additional income tax owing from three years ago as a result of ininmner caleulatinns hw th rP ^ da ENG 2013 04 to searchExplanation / Answer
ANSWER:
1. Change in a plant asset’s residual value.
Solution: Accounted in the current year
2. Change due to an overstatement of inventory.
Solution: Accounted for previous years also
3. Change from sum-of-the-years’-digits to straight-line depreciation method because of a change in the patters of benefits received
Solution: Accounted in the current year
4. Change in a primary source of GAAP
Solution: Accounted for previous years also
5. Decision by management to capitalize interest. The company is reporting a self-constructed asset for the first time.
Solution: Accounted in the current year
6. Change in the rate used to calculate warranty costs.
Solution: Accounted in the current year
7. Change from an unacceptable accounting principle to an acceptable accounting principle
Solution: Accounted for previous years also
8. Change in a patent’s amortization period.
Solution: Accounted in the current year
9. Change from the zero-profit method to the percentage-of-completion method on construction contracts. This change was the result of experience with the project and improved ability to estimate the costs to completion and therefore the percentage complete.
Solution: Accounted in the current year
10. Recognition of additional income tax owing from three years ago as a result of improper calculations by the accountant who was not familiar with income tax legislation and income tax returns.
Solution: Accounted for previous years also
Explanation:
Prospective application refers to implementation of a new accounting policy to transactions after the date of the policy change, thus the recognition of the effect of changes in estimation of accounting in the current as well as future periods. However change is not applied to prior periods.
Retrospective refers to application of new accounting policies for transaction, event, or other circumstances as if it had been implemented.
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