Its Friday, and that means its time for the weekly pop quiz. The first to post the correct answers to the following questions will win a $10 gift certificate to Starbucks . Good luck! Here we go: FAR Question 1: In which of the following situations should a company report a Prior period adjustment? A. A change in the estimated useful lives of fixed assets purchased in prior years. B. The correction of a mathematical error in the calculation of prior years depreciation. C. A switch from the straight-line to double-declining-balance method of depreciation. D. The scrapping of an asset prior to the end of its expected useful life. Question 2: On January 2, 2005, Air, Inc. agrees to pay its former president $300,000 under a deferred-compensation arrangement. Air should have recorded this expense in 2004, but did not do so. Airs reported income tax expense would have been $70,000 lower in 2004 had it properly accrued this deferred compensation. In its December 31, 2005 financial statements, Air should adjust the beginning balance of its retained earnings by a: A. $230,000 credit. B. $230,000 debit. C. $300,000 credit. D. $370,000 debit. Question 3: In single period statements, which of the following should be reflected as an adjustment to the opening balance of retained earnings? A. Effect of a failure to provide for uncollectible accounts in the previous period. B. Effect of a decrease in the estimated useful life of depreciable equipment. C. Adoption of a new accounting method for transactions that in the past had an immaterial effect on the financial statements. D. Cumulative effect of a change from an accelerated method to straight-line depreciation. Question 4: How should the effect of a change in accounting estimate be accounted for? A. By restating amounts reported in financial statements of prior periods. B. By reporting pro forma amounts for prior periods. C. As a Prior period adjustment to beginning retained earnings. D. In the period of change and future periods if the change affects both. Question 5: Miller Co. discovers that in the prior year, it failed to report $40,000 of depreciation related to a newly constructed building. The depreciation was computed correctly for tax purposes. The tax rate for the current year is 40%. What was the impact of the error on Millers financial statements for the prior year? A. Understatement of accumulated depreciation of $24,000. B. Understatement of accumulated depreciation of $40,000. C. Understatement of depreciation expense of $24,000. D. Understatement of net income of $24,000.
Posted on: Fri, 31 Jan 2014 17:33:35 +0000
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