Which of the following should be reported as a change in accounting estimate?
a) Change in the reported beginning inventory amount due to a discovery of a bookkeeping error
b) Change from the completed contract method to the percentage of completion method for revenue recognition on long term construction contracts
c) Increase in the rate applied to net credit sales from 1 percent to 1 1/2 percent in determining losses from uncollectible receivables
d) Change made to comply with a new FASB pronouncement
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Question 2 (3 points)
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Which of the following is NOT a change in reporting entity?
Question 2 options:
a) A company acquires a subsidiary that is to be accounted for as a purchase.
b) A company presents consolidated or combined statements in place of statements of individual companies.
c) A company changes the companies included in combined financial statements.
d) A company changes the subsidiaries for which consolidated statements are presented.
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Question 3 (3 points)
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McCartney Corp. reports on a calendar year basis. Its 2013 and 2014 financial statements contained the following errors:
2013
2014
Over(under)statement of ending inventory ….
$(10,000)
$ 4,000
Depreciation understatement ……………..
4,000
6,000
Failure to accrue salaries at year end ……
8,000
12,000
As a result of the above errors, 2014 income would be
Question 3 options:
a) overstated by $4,000.
b) overstated by $24,000.
c) overstated by $22,000.
d) overstated by $16,000.
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Question 4 (3 points)
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Badger Corporation purchased a machine for $132,000 on January 1, 2011, and depreciated it by the straight line method using an estimated useful life of eight years with no salvage value. On January 1, 2014, Badger determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of $12,000. A change in estimate was made in 2014 to reflect these additional data. What amount should Badger record as the balance of the accumulated depreciation account for this machine at December 31, 2014?
Question 4 options:
a) $73,000
b) $77,000
c) $61,250
d) $63,600
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Question 5 (3 points)
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Pages, Inc. receives subscription payments for annual (one year) subscriptions to its magazine. Payments are recorded as revenue when received. Amounts received but unearned at the end of each of the last three years are shown below.
2012
2013
2014
Unearned revenues ………….
$120,000
$150,000
$176,000
Pages failed to record the unearned revenues in each of the three years. The entry needed to correct the above errors is
Question 5 options:
a) Retained Earnings ……………… 150,000
Subscription Revenues ………….. 26,000
Unearned Revenues …………… 176,000
b) Retained Earnings ……………… 30,000
Subscription Revenues ………….. 26,000
Unearned Revenues …………… 56,000
c) Subscription Revenues ………….. 176,000
Unearned Revenues …………… 176,000
d) Subscription Revenues ………….. 150,000
Retained Earnings ……………… 26,000
Unearned Revenues …………… 176,000
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Question 6 (3 points)
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On December 31, 2014, Artistown Company appropriately changed to the FIFO cost method from the weighted average cost method for financial statement and income tax purposes. The change will result in a $700,000 increase in the beginning inventory at January 1, 2014. Assuming a 40 percent income tax rate and that no comparative financial statements for prior years are reported, the cumulative effect of this accounting change reported for the year ended December 31, 2014, is
Question 6 options:
a) $700,000.
b) $350,000.
c) $420,000.
d) $280,000.
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final 212 exa….docx