Which of the following is characteristic of a change in an accounting estimate?

53. Which of the following is not a change in accounting policy?
A. Change in the depreciation method from straight-line to declining balance.
B. Change from completed contract to percentage of completion.
C. Change from Weighted Average to FIFO.
D. Change in depreciation from eight years to five years.
E. They are all changes in accounting policy.

54. A change from an accelerated depreciation method to the straight-line depreciation method should be accounted for as a:
A. Change in accounting entity.
B. Change in accounting principle.
C. Change in accounting estimate.
D. Correction of accounting error.
E. Change in accounting principle or estimate, depending on the degree of practicality.

55. A change from the sum-of-the-years'-digits depreciation method to the straight-line depreciation method should be accounted for as a(n):
A. Change in accounting policy.
B. Prospective change.
C. Change in accounting estimate.
D. Accounting error

56. When a firm changes only the estimated residual value of equipment:
A. Depreciation must be recomputed for each previous year based on the new residual value.
B. The remaining book value, reduced by the new residual value, is the basis for subsequent depreciation.
C. The original cost, reduced by the new residual value, is the basis for subsequent depreciation.
D. No adjustment is needed.

57. On January 1, 2015, JTC changed to the weighted-average cost method from the first-in, first-out (FIFO) cost method for inventory cost flow purposes. JTC can justify this as a change in policy. The change will result in a $120,000 decrease in the beginning inventory at January 1, 2015. Ignoring income taxes, the cumulative effect of changing to the weighted-average method from the FIFO method must be reported by JTC in the 2015:
A. Income statement as a $120,000 debit.
B. Statement of retained earnings as a $120,000 debit adjustment to the beginning balance.
C. Income statement as a $120,000 credit.
D. Statement of retained earnings as a $120,000 credit adjustment to the beginning balance.

58. Which of the following events would require disclosure in the current financial statements?
A. Change in the method used to calculate bad debt expense.
B. Change from Weighted Average to FIFO for merchandise inventory.
C. Change in the estimated amortization period for an intangible asset.
D. Change in recording the income for long-term construction contracts
E. All of these choices are correct.

59. A change in the unit depletion rate would be accounted for as a:
A. Correction of an accounting error.
B. Change in accounting estimate.
C. Change in accounting principle.
D. Change in accounting entity

60. Which one of the following statements is not correct?
A. A change from an inappropriate accounting principle to a proper one should be accounted for as an accounting error.
B. Assets purchased on the 14th of the month may be depreciated from the first of the month for practical reasons.
C. Depreciation accounting is a process of allocation of periodic expense, rather than one of asset valuation.
D. Use of straight-line depreciation gives a higher total expense than accelerated methods over the total useful life of the asset.

61. Choose the correct statement regarding accounting changes.
A. All changes in accounting principle require a cumulative effect to be recognized in the income statement.
B. Changing from FIFO to Weighted Average is a retrospective accounting principle change.
C. Income statements numbers are required to be disclosed for most accounting principle changes.
D. The amount of the correction for an error affecting previous earnings will be disclosed in current earnings.

62. Which of the following statements is correct?
A. A change in estimated useful life for a building should cause a correction to prior years' retained earnings.
B. A change in method of accounting for depreciation should cause an adjustment to current year's depreciation expense and a cumulative effect for the effect of the change on prior year's earnings.
C. An error affecting prior year's depreciation is treated as a change in estimate.
D. A cumulative effect will never be accompanied by a related tax effect

63. The concept of consistency is sacrificed in the accounting for which of the following items?
A. Change is the estimated salvage value of an asset
B. Cumulative effect of change in accounting principle
C. Discontinued operations
D. Loss on disposal of a segment of a business

64. Which of the following changes would be accounted for prospectively?
A. Changing from declining-balance depreciation to straight-line depreciation
B. Change in the expected life of a depreciable asset
C. First time presentation of assumption financial statements with the FIFO cost flow
D. Error corrections

65. Which of the following changes would be accounted for using the approach of a retrospective approach without restatement?
A. Change in the estimated life of a depreciable asset
B. Change from a non-GAAP accounting method to a GAAP method of accounting for bad debts
C. Overstatement of unearned revenue of the prior period
D. Change in the method of accounting for long-term construction contracts
E. Change to FIFO with previous year's information unavailable

66. The effects for a change in accounting principle would usually be reported on the face of the income statement for a change:
A. From the straight-line method of depreciation to the declining-balance method.
B. From presenting statements for errors which effect only one of the financial statements.
C. In the service lives of depreciable assets.
D. In the residual value of a depreciable asset.
E. None of these choices are correct.

67. When an accounting change is to be recorded and reported under the Retrospective approach, the:
A. Retained earnings is adjusted for the cumulative effect of the change.
B. Cumulative effect of the change is reported as a special item in the income statement in the year of the change.
C. Effect of the change is spread over the past, current, and future accounting periods.
D. Pro forma financial statements for future years must be disclosed

68. The primary principle addressed by recent changes to ASPE and IFRS on accounting changes and error corrections is the:
A. Going-concern principle.
B. Matching principle.
C. Comparability principle.
D. Full-disclosure principle

69. A change in the salvage value of a depreciable asset should be accounted for as a:
A. Change in accounting entity.
B. Correction of an accounting error.
C. Change in accounting estimate.
D. Change in accounting principle.

72. Which type of accounting change should always be accounted for in current and future periods?
A. Change in accounting estimate
B. Correction of an error
C. Change in accounting principle
D. Change in inventory costing methods

73. Which of the following is characteristic of a change in accounting estimate?
A. Requires the reporting of income statements amounts for prior periods
B. Does not affect the financial statements of prior periods
C. Never needs to be disclosed
D. Should be reported through restatement of the financial statements

74. Which of the following is not an example of a change in accounting estimate?
A. Change in the estimated loss rate on receivables
B. Change in the residual value of natural resources subject to depletion
C. Change in the expected warranty costs on goods sold under a warranty
D. Change in the expected recovery of a deferred charge
E. Change in the composition of inventory cost

75. A change in an amortization rate, such as on a copyright, should be accounted for:
A. Retrospectively.
B. By recording an amount in retained earnings only.
C. Prospectively.
D. Currently.

76. Which of the following is an example of a change in accounting estimate?
A. Change from the percentage-of-completion method to the completed-contract method of income recognition for long-term construction contracts
B. Change from capitalizing research and development costs to expensing such costs
C. Change from the gross margin method to the retail method of estimating the ending inventory
D. Change from the Weighted Average method to the FIFO inventory method
E. Change in the estimate of future warranty costs

77. If the estimated useful life of an asset was originally 10 years and then later changed to 12 years, the effects of this change should be:
A. Reported as a special item on the income statement in the year it occurs.
B. Spread over the current and future periods.
C. Reported and recorded retrospectively, including pro forma financial statements in the year of change.
D. Recorded in an adjustment to the Accumulated Depreciation account and the Retained Earnings account in the year of change.

78. Reported income during the early years of the estimated life of a depreciable asset usually would be understated by the most as a result of:
A. High estimates of residual value and useful life.
B. Using actual residual value and actual useful life.
C. Low estimate of residual value and useful life.
D. Low estimate of residual value and high estimate of useful life.

79. WZ acquired some machinery on January 2, 20x1. WZ used straight-line depreciation with an estimated life of 15 years with no residual value. On January 1, 20x6, WZ estimated that the remaining life of this machinery was 6 years with no residual value. How should this change be accounted for by WZ?
A. Revising future depreciation perA year, computed by dividing the book value on January 1, 20x6 by six.
B. Revising future depreciation per year, computed by dividing the original cost by six.
C. Estimating the effect of the change on each year's net earnings, but maintaining the method of depreciation as originally determined.
D. None of these choices are correct.

80. A change in the estimated useful life of a building:
A. is not allowed under ASPE or IFRS.
B. affects depreciation on the building beginning with the year of the change.
C. must be handled as a retrospective adjustment to all accounts affected, back to the year of building acquisition.
D. creates a new account to be recognized on the income statement, and reflects the depreciation difference up to the beginning of the year of change.

81. Under which of the following changes would no "catch-up" entry be required, because the remaining accounting value is allocated over the present and future periods?
A. Correction of an error.
B. Change to new tax laws.
C. Change in accounting principle.
D. Change in accounting estimate

82. An accounting clerk working for DBB neglected to record the purchase of merchandise in 20x1, which was, shipped f.o.b. shipping point on December 20, 20x1, and which arrived on December 31. The goods were included in the ending 20x1 inventory. What was the effect on DBB's 20x1 cost of goods sold?
A. Cost of goods sold was correct.
B. Cost of goods sold was understated.
C. Cost of goods sold was overstated.
D. Data are not available to determine effect on cost of goods sold

83. Which of the following types of errors will not self-correcting the next year?
A. Accrued expenses not recognized at year-end.
B. Accrued revenues (but not collected) not recognized at year-end.
C. Depreciation expense overstated for the year.
D. Prepaid expenses not recognized at year-end.
E. Prepaid revenues (collected in advance) not recognized at year-end.

84. On December 25, 20x2, JKL ordered merchandise for resale from QRS that cost $7,000 (terms cash within 10 days). QRS shipped the merchandise f.o.b. shipping point on December 28, 20x2, and the goods arrived on January 2, 20x3. The invoice was received on December 30, 20x2. JKL did not record the purchase in 20x2 and did not include the goods in the 20x2 ending inventory. The effects on JKL's 20x2 financial statements were:
A. Income and owners' equity were correct. Liabilities were incorrect. Assets were correct.
B. Income and owners' equity were correct; assets and liabilities were incorrect.
C. Income, assets, liabilities, and owners' equity were correct.
D. Income, assets, liabilities and owners' equity were incorrect.
E. No errors because the goods were not on hand.

85. In reporting the effect of an accounting change on comparative financial statements, recommended accounting procedure requires that the following be used for correcting an accounting error:
A. Prospective application.
B. Future application.
C. Retrospective application.
D. Retrospective, no restatement application.

86. Which of the following should not be reported retrospectively?
A. Use of an unacceptable accounting principle, then changing to an acceptable accounting principle
B. Correction of an overstatement of ending inventory two years ago
C. Use of an unrealistic accounting estimate, then changing to a realistic estimate
D. Change from a good faith but erroneous estimate to a new estimate

87. Which of the following is a counterbalancing error?
A. Understated by depletion expense.
B. Bond premium under-amortized.
C. Prepaid expense adjusted incorrectly.
D. Overstated depreciation expenses.

88. If BJC's beginning inventory in the current year is overstated, and that is the only error in the current year, then BJC's income for the current year will be:
A. Understated; Assets will be correct.
B. Understated; Assets will be overstated.
C. Overstated; Assets will be overstated.
D. Understated; Assets will be understated.

89. Which of the following is not an example of an accounting error, as distinguished from a change in accounting principle or change in estimate?
A. Misstatement of an accounting value, such as inventory, deferred charge or credit, liabilities, or owners' equity.
B. Incorrect classification of expenditure as between expense and an asset.
C. Incorrect or unrealistic allocations of accounting values.
D. Failure to recognize accruals and deferrals.
E. Recognition of a gain on disposal of fully depreciated property

90. Which of the following would cause income to be overstated in the period of occurrence?
A. Overestimated bad debt expense
B. Understated by beginning inventory
C. Overstated purchases
D. Understated by ending inventory

Which of the following is a change in accounting estimates?

What is the characteristic of accounting estimates?

How is a change in accounting estimate accounted for?

Which of the following is a change in accounting?