Bakersfield College

ACG 2021

1)Which of the following accounting changes should not be accounted for prospectively?

1. 1. The correction of an error.
   2. A change from declining balance to straight-line depreciation.
   3. A change from straight-line to declining balance depreciation.
   4. A change in the expected salvage value of a depreciable asset.

 

 

 

 

2. Prior years' financial statements are restated under the:
   1. Current approach.
   2. Prospective approach.
   3. Retrospective approach.
   4. None of these answer choices is correct.

 

 

 

 

3. A change that uses the prospective approach is accounted for by:
   1. Implementing it in the current year.
   2. Reporting pro forma data.
   3. Retrospective restatement of all prior financial statements in a comparative annual report.
   4. Giving current recognition of the past effect of the change.

 

 

 

 

4. The cumulative effect of most changes in accounting principle is reported:
   1. In the income statement between income from continuing operations and net income.
   2. In the income statement after income and before income tax.
   3. In the income statement before income from continuing operations. n.
   4. In the balance sheet accounts affected.

 

 

 

 

5. When an accounting change is reported under the retrospective approach, account balances in the general ledger:
   1. Are not adjusted.
   2. Are closed out and then updated.
   3. Are adjusted net of the tax effect.
   4. Are adjusted to what they would have been had the new method been used in previous years.

 

 

 

 

6. During 2016, Hoffman Co. decides to use FIFO to account for its inventory transactions. Previously, it had used LIFO.
   1. Hoffman is not required to make any accounting adjustments.
   2. Hoffman has made a change in accounting principle requiring retrospective adjustment.
   3. Hoffman has made a change in accounting principle requiring prospective application.
   4. Hoffman needs to correct an accounting error.

 

 

 

 

7. Which of the following would not be accounted for using the retrospective approach?
   1. A change from LIFO to FIFO inventory costing.
   2. A change from the completed contract method to the percent-of-completion method for long- term construction contracts.
   3. A change in depreciation methods.
   4. A change from the full cost method in the oil industry.

 

 

 

 

8. Which of the following would not be accounted for using the prospective approach?
   1. A change to LIFO from FIFO for inventory costing.
   2. A change in price indexes used under the LIFO method of inventory costing.
   3. A change in estimate.
   4. A change from the cash basis to accrual accounting.

 

 

 

 

9. Which of the following changes in inventory costing usually should not be reported by revising the financial statements of prior periods?
   1. The weighted-average method to the LIFO method.
   2. The weighted-average method to the FIFO method.
   3. FIFO method to the weighted-average method.
   4. LIFO method to the weighted-average method.

 

 

 

 

10. Which of the following changes should be accounted for using the retrospective approach?
    1. A change in the estimated useful life of a depreciable asset.
    2. A change from straight-line to declining balance depreciation.
    3. A change from completed-contract method of accounting for long-term construction contracts.
    4. A change to LIFO method of costing inventories.

 

 

 

11. La Casita Restaurants changed from the FIFO method of inventory costing to the weighted average method during 2016. When reported in the 2016 comparative financial statements, the 2015 inventory amount will be:
    1. Increased.
    2. Decreased.
    3. Increased or decreased, depending on how prices changed.
    4. Unaffected.

 

 

 

 

12. B Company switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2016. The change affects machinery purchased at the beginning of 2014 at a cost of $72,000. The machinery has an estimated life of five years and an estimated residual value of $3,600. What is B’s 2016 depreciation expense?

a.    $ 9,120.

b.   $13,680.

c.     $15,840.

d.   $19,200.

 

 

 

 

13. Blue Co. has a patent on a communication process. The company has amortized the patent on a straight-line basis since 2012, when it was acquired at a cost of $36 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2016 (before adjusting and closing entries). What is the appropriate patent amortization expense in 2016?
    1. $ 4 million.
    2. $ 5 million.
    3. $10 million.
    4. $20 million.

 

 

 

 

14. Orange Corp. constructed a machine at a total cost of $70 million. Construction was completed at