ACC/305 ACC305 ACC 305 WEEK 7 HOMEWORK

ACC 305 WEEK 7 HOMEWORK

Brief Exercise 22-3

Shannon, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2014. The increase in the prior year's income before taxes is $1,122,200. The tax rate is 39%.

Prepare Shannon’s 2014 journal entry to record the change in accounting principle. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

 

Brief Exercise 22-7

At January 1, 2014, Beidler Company reported retained earnings of $2,036,000. In 2014, Beidler discovered that 2013 depreciation expense was understated by $364,300. In 2014, net income was $942,410 and dividends declared were $246,010. The tax rate is 36%.

Prepare a 2014 retained earnings statement for Beidler Company.

 

Brief Exercise 22-9

Roundtree Manufacturing Co. is preparing its year-end financial statements and is considering the accounting for the following items.

Identify whether each of the below items is a change in principle, a change in estimate, or an error.

 

Exercise 22-1

	Your answer is correct.

Pam Erickson Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows.

Pretax Income from:

 (a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2015?

(b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

 

 

Exercise 22-4

Gordon Company started operations on January 1, 2009, and has used the FIFO method of inventory valuation since its inception. In 2014, it decides to switch to the average cost method. You are provided with the following information.

(a) What is the beginning retained earnings balance at January 1, 2011, if Gordon prepares comparative financial statements starting in 2011?

(b) What is the beginning retained earnings balance at January 1, 2014, if Gordon prepares comparative financial statements starting in 2014?

(c) What is the beginning retained earnings balance at January 1, 2015, if Gordon prepares single-period financial statements for 2015?

(d) What is the net income reported by Gordon in the 2014 income statement if it prepares comparative financial statements starting with 2012?

 

Exercise 22-8

	Your answer is correct.

Listed below are various types of accounting changes and errors.

For each change or error, indicate how it would be accounted for using the following code:

 

Problem 22-1 (Part Level Submission) Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you. 1.   Holtzman purchased equipment on January 2, 2011, for $89,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,400 salvage value. 2.   During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $500,000. It had a useful life of 10 years and a salvage value of $33,000. The following computations present depreciation on both bases for 2012 and 2013.     3.   Holtzman purchased a machine on July 1, 2012, at a cost of $130,000. The machine has a salvage value of $10,000 and a useful life of 8 years. Holtzman’s bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value.

 

 

(a)

 

Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

 

(b)

 

Show comparative net income for 2013 and 2014. Income before depreciation expense was $295,914 in 2014, and was $312,035 in 2013. (Ignore taxes.)

 

IFRS Multiple Choice Question 06

	Your answer is correct.

Is the following exception applicable to IFRS or U.S. GAAP?
“If determining the effect of a change in accounting principle is considered impracticable, then a company should report the effect of the change in the period in which it believes it practicable to do so.”

		Yes   Yes

 

No   No

 

Yes   No

 

No   Yes

 

IFRS Multiple Choice Question 07

Is the following exception applicable to IFRS or U.S. GAAP?
“If determining the effect of a correction of an error is considered impracticable, then a company should report the effect of the error correction in the period in which it believes it practicable to do so.”

IFRS

U.S. GAAP

 

Yes   No

 

No   No

 

No   Yes

 

Yes   Yes

 

IFRS Multiple Choice Question 08

Detailed guidance regarding the accounting and reporting for the indirect effects of changes in accounting principle is available under

U.S. GAAP only.

 

both U.S. GAAP and IFRS.

 

neither U.S. GAAP nor IFRS.

 

IFRS only.

 

IFRS Multiple Choice Question 09

Ben, Inc. follows IFRS for its external financial reporting. Ben, Inc. owns 25% of the outstanding stock of Black, Inc. and accordingly uses the equity method to account for its investment. Which of the following is true regarding Ben, Inc.'s policies related to Black, Inc.?

None of these is true regarding how Ben, Inc. accounts for its investment in Black, Inc.

 

Ben, Inc. will increase the investment account for its pro-rata share of Black, Inc.'s net loss for the year.

 

Ben, Inc. will conform the accounting policies of Black, Inc. to its own accounting policies.

 

Ben, Inc. will increase the investment account for its pro-rata share of the dividends paid out by Black, Inc. for the year.

 

IFRS Multiple Choice Question 10

Ben, Inc. follows U.S. GAAP for its external financial reporting. Ben, Inc. owns 25% of the outstanding stock of Black, Inc. and accordingly uses the equity method to account for its investment. Which of the following is true regarding Ben, Inc.'s policies related to Black, Inc.?

None of these is true regarding how Ben, Inc. accounts for its investment in Black, Inc.

 

Ben, Inc. will conform the accounting policies of Black, Inc. to its own accounting policies.

 

Ben, Inc. will increase the investment account for its pro-rata share of Black, Inc.'s net loss for the year.

 

Ben, Inc. will increase the investment account for its pro-rata share of the dividends paid out by Black, Inc. for the year.