中级会计学intermediateaccountingchapter22赖红宁课后答案

1、CHAPTER 22ACCOUNTING CHANGES AND ERRORSCONTENT ANALYSIS OF EXERCISES AND PROBLEMSNumberContentTime Range(minutes)E22-1Identification of Changes and Errors. Indicate how to report various items, whether increases or decreases are to be expected. 5-10E22-2Identification of Changes and Errors. Indicate

2、 how to report various items, whether increases or decreases are to be expected. 5-10E22-3Accounting Changes and Errors. Describe correct accounting treatment for different events. 5-10E22-4Change in Depreciation Method. Double-declining to straight-line. Journal entry. Preparation of comparative in

3、come statements.15-25E22-5Change in Depreciation Method. Straight-line to sum-of-years' digits. Journal entry. Preparation of comparative income statements.15-25E22-6Change to Inventory Cost Flow Assumption. FIFO to average cost. Journal entry. Preparation of comparative income statements.15-25E

4、22-7(AICPA adapted). Change in Inventory Cost Flow Assumption. FIFO to LIFO. Effect on income taxes.10-15E22-8Change in Inventory Method. LIFO to FIFO. Journal entry. Preparation of comparative income statements and retained earnings statements.15-25E22-9Change in Accounting Principle. Completed-con

5、tract to percentage-of-completion. Income statements, statement of retained earnings.10-15E22-10Errors. Discovered year after made. Journal entries to correct several independent situations.10-15E22-11Errors. Discovered two years after made. Journal entries to correct several independent situations.

6、10-1558 / 58文档可自由编辑打印NumberContentTime Range(minutes)E22-12Effects of Errors. On assets, liabilities, owners' equity, net income in year of error. 5-10E22-13Errors. Discovered one or two years after made. Journal entries to correct several independent situations.10-15E22-14Omission of Accruals a

7、nd Prepayments. Computation of correct net income. Journal entries if error discovered after one year, after two years. 5-10P22-1(AICPA adapted). Identification and Effects of Changes and Errors. Indicate how to classify, and the accounting treatment for, 10 transactions.10-15P22-2Changes in Invento

8、ry Cost Flow Assumption. LIFO to FIFO, average cost to FIFO, FIFO to LIFO. Bonus. Comparative income statements.40-60P22-3Change in Inventory Cost Flow Assumption. FIFO to average cost. Journal entry and comparative financial statements.30-45P22-4Change in Inventory Cost Flow Assumption. LIFO to ave

9、rage cost. Journal entry and comparative financial statements.30-45P22-5Change in Depreciation Method. Straight-line to double-declining balance. Journal entry. Comparative income statements. Bonus paid to employees. Prior period adjustment (not GAAP).40-60P22-6Change in Accounting Principle. Comple

10、ted-contract to percentage-of-completion. Journal entry. Comparative financial statements.40-60P22-7Changes Related to Machinery. Revision of expected life, residual value, or depreciation method. Journal entries. Pro forma net income.30-45P22-8(AICPA adapted). Change in Accounting for Inventory. FI

11、FO to LIFO. Computation of effect on income.20-30P22-9(AICPA adapted). Change in Accounting Principle and Estimate. Declining-balance to straight-line. Bad debt expense percentage increased. Computation of amounts which would appear on the comparative financial statements.45-60P22-10First Issuance o

12、f Financial Statements. Prepare financial statements for prior three years. Describe method to account for each item if statements had been issued publicly.40-60P22-11Error Correction. Discovered before books are closed, and after books are closed. Journal entries.25-35NumberContentTime Range(minute

13、s)P22-12Error Correction. Determination of correct net income. Adjusting journal entry.20-30P22-13Error Correction. Worksheet to determine correct net income, adjusted balance sheet accounts.25-35P22-14Error Correction. Analysis of effect on income and ending balance sheet.30-40P22-15(AICPA adapted)

14、. Comprehensive. Change in estimate and principle, errors. Worksheet reconciling income. Computation of cumulative effect.30-40P22-16(AICPA adapted). Comprehensive: Errors. Discovered in same period. Journal entries. Computation of corrected net income.30-40ANSWERS TO QUESTIONSQ22-1APB Opinion No. 2

15、0 defines three types of changes: a change in accounting principle, a change in accounting estimate, and a change in reporting entity. A change in accounting principle occurs when a company adopts a generally accepted accounting principle different from the one used previously for items currently re

16、ported, such as a change in an inventory cost flow assumption or depreciation method. Changes in accounting estimates occur because the preparation of financial statements requires estimation of the effects of future events, and such estimates sometimes must be changed as new events occur, more expe

17、rience is acquired, or additional information is obtained. A change in reporting entity is caused by a change in the make-up of the entity being reported, such as an increase or decrease in the number of subsidiaries included in the reporting entity for consolidated financial statements.Q22-2The thr

18、ee possible methods a company could use to disclose an accounting change in the financial statements are to (1) retroactively adjust past financial statements (prior period restatement), (2) include the cumulative effect of the change in the income of the current period, or (3) adjust for the c

19、hange prospectively. The major argument in favor of prior period restatement is that all financial statements presented at a given date should be prepared on the basis of consistent accounting principles. An argument against prior period restatement is that users may be confused by the change in the

20、 reported results and that confidence in the accounting profession may be lost because "they change the numbers." The use of the cumulative effect adjustment is favored because it is consistent with the all-inclusive income concept. The major argument against cumulative effect adjustments

21、is that comparative financial statements are not being prepared on the basis of consistent application of accounting principles. An argument in favor of prospective adjustment is that the reporting of the effect of a change in estimate cumulatively or retroactively might cause a great deal of confus

22、ion for users of the financial statements because of the frequency of such changes. An argument Q22-2 (continued)against prospective adjustment is that the change may be seen as an event of the period, and would be more appropriately accounted for by a cumulative effect adjustment.Q22-3A company cou

23、ld justify a change in accounting principle on the grounds that the new principle is preferable to the old. One example would be a change from FIFO to LIFO, because the change results in a more meaningful matching of costs with revenues. Another example would be a change from straight-line depreciat

24、ion to sum-of-the-years'-digits depreciation, because the new method better reflects the pattern of benefits from the fixed assets. A different kind of example is the adoption of a new principle because of the issuance of an FASB Statement of Standards.Q22-4A change in accounting principle occur

25、s when one generally accepted accounting principle is adopted in place of the one used previously for reporting purposes. A change in estimate results from new events occurring, more experience being acquired, or additional information being obtained that necessitates a revision of an accounting est

26、imate previously made. It is often difficult to distinguish between a change in principle and a change in estimate because they are interdependent. For example, a change in the estimated productive use of equipment may cause a change in the method of depreciating that equipment. A company accounts f

27、or a change in accounting principle as a cumulative effect in the year of change, with a few exceptions, and accounts for a change in estimate prospectively. A company accounts for a change in accounting principle that is associated with a change in estimate prospectively.Q22-5The four exceptions to

28、 the normal method of accounting for a change in accounting principle are1.When a company adopts a new accounting principle for future events and does not change the accounting for past events of the same nature, it discloses a description of the nature of the change, its effect on income before ext

29、raordinary items and net income of the period of the change, and its effect on the earnings per share amounts.2.When the cumulative effect is not determinable, a company discloses the effect of the change on the results of operations for the period of change, including earnings per share data, as we

30、ll as an explanation for the omission of cumulative effect data and pro forma amounts for prior years.3.When a company makes an initial public sale of common stock, it retroactively restates the financial statements for all prior periods presented.4.When the advantages of retroactive treatment in pr

31、ior periods outweigh the disadvantages, prior period restatement (adjustment) is required. This applies to a change from LIFO to another inventory flow method, a change in the method of accounting for long-term construction contracts, a change to or from the "full cost" method of accountin

32、g (which is used in the extractive industries), a change from the retirement-replacement-betterment accounting to depreciation accounting (for railroad track structures), and a change from the fair value method to the equity method for investments in common stock.Q22-6The cumulative effect may not b

33、e determinable when the accounting system does not include sufficient information; for example, when a company changes to LIFO from another inventory cost flow assumption, it probably would not have records of the costs of the additions to and reductions in the LIFO layers that would have occurred i

34、f it had used LIFO in the past. In this situation, its disclosure is limited to showing the effect of the change on the results of operations of the period of change (including per share data) and explaining the reason for omitting the cumulative effect and disclosure of pro forma amounts for prior

35、years.Q22-7The following changes in accounting principle require prior period restatement (retroactive adjustment) instead of cumulative effect disclosure: (1) a change from the LIFO method of inventory pricing to another cost flow method; (2) a change in the method of accounting for long-term const

36、ruction-type contracts; (3) a change to or from the full-cost method of accounting, used in the extractive industries, (4) a change from retirement-replacement-betterment accounting to depreciation accounting, for railroad track structures; and (5) a change from the fair value method to the equ

37、ity method for investments in common stock. The reason for restating prior periods for these changes instead of showing the cumulative effect in the current year is that the size of the cumulative effect of the change may be so much greater than operating income that including it in the income state

38、ment might appear to reduce the significance of income from operations. Prior period restatement is also required when a change is made to a new accounting principle in order to conform to requirements set forth in an FASB Statement of Standards.Q22-8A pro forma statement is one that shows financial

39、 amounts as if the newly adopted accounting principle had been applied during all periods presented. In general, when a company changes an accounting principle it shows the cumulative effect of the change on the income statement and discloses pro forma amounts (a complete pro forma statement is not

40、necessary). The company discloses the pro forma amounts on the face of the income statement for all periods presented (and for the preceding period as well, if only the current period is presented) and should reflect both the direct effects of the change, including income tax effects, and indirect e

41、ffects, such as bonus expenses based on income.Q22-9FASB Statement No. 3 defines the principles to be followed in reporting accounting changes in interim statements. If a company makes a cumulative effect type of accounting change during the first interim period, it includes the cumulative effect of

42、 the change on retained earnings at the beginning of the year in the net income of the first interim period. However, if a company makes a cumulative effect type of change in other than the first interim period, it restates the prior interim periods by applying the newly adopted principle to those i

43、nterim periods, and reports the cumulative effect of the change on retained earnings at the beginning of the year in the restated net income of the first interim period.For those changes in accounting principle for which the cumulative effect cannot be determined, disclosure of the change is necessa

44、ry but no adjustments are required if the change occurs in the first interim period. If a company makes the change in other than the first interim period, it restates the financial statements of the prechange interim periods by applying the newly adopted accounting principle to those prechange inter

45、im periods.Q22-10Since accounting involves periodic reporting and matches costs as expenses against revenues, it necessarily involves estimation. Changes in estimates are inevitable as new events occur, more experience is acquired, or additional information is obtained. Some examples of changes in a

46、ccounting estimates include a change in the estimated useful life or residual value of an asset, a change in estimated warranty costs because of a newly discovered defect, a change in the estimated amount of uncollectible accounts receivable, and a change in the estimated amount of recoverable miner

47、al reserves.A company accounts for a change in accounting estimate in the period of change if it affects that period only, or in the period of change and future periods if it affects both. A change in accounting estimate does not require a cumulative effect adjustment or prior period restatement.Q22

48、-11A change in a reporting entity occurs mainly when (a) consolidated or combined statements are presented in place of the statements of individual companies, (b) there is a change in the specific subsidiaries that make up the group of companies for which consolidated financial statements are presen

49、ted, and (c) the companies included in combined financial statements change.When a change in a reporting entity occurs, the company reports it as a prior period adjustment. Additionally, the company includes a description of the nature of the change and the reason for it in the notes to the financia

50、l statements of the period in which the change is made. Furthermore, in the period of the change, the company discloses the effect of the change on income before extraordinary items, net income, and related earnings per share amounts for all periods presented. The company need not repeat the disclos

51、ures in the financial statements of future periods. Q22-12A material error of a prior period that is discovered in the current period is accounted for as a prior period adjustment (restatement) and therefore is excluded from net income. On the current period financial statements, the company reports

52、 the error (net of related income tax effects) as an adjustment to the beginning balance of retained earnings. When comparative statements are presented, it makes adjustments to the affected items on the income statements and to the retained earnings balances, as well as the balances of the affected

53、 balance sheet accounts for all periods reported. In addition, the company discloses the nature of the error in previously issued financial statements and the effect of its correction on income before extraordinary items, net income, and the related earnings per share amounts for each year reported.

54、Q22-13Errors that affect only a company's balance sheet are mainly classification errors. These include classifying a long-term note receivable as a current receivable and failing to include the current portion of long-term debt in current liabilities.Q22-14Errors that affect only a company'

55、s income statement usually result from misclassification of items. Examples of this include combining interest revenue with sales revenue and including selling expenses in cost of goods sold.Q22-15One example of an error that is counterbalanced in the following period is the failure to accrue an int

56、erest liability in the current period when the interest is to be paid in the next period. The effect of this error in the current period is to understate interest expense and thus overstate net income and retained earnings, and to understate interest payable. In the following period when the interes

57、t is paid and treated as an expense, interest expense is overstated and net income is understated by the same amount as it was overstated in the previous period. Therefore, at the end of the second period, retained earnings is correctly stated.Another example of an error that is counterbalanced in the following period is the overstatement of ending inventory under a periodic inventory system. In the current period, cost of goods sold is understated, which results in net income and retained earnings being overstated. In the following period, however, beginning inventory is overst