ACC/305 ACC305 ACC 305 WEEK 8 QUIZ

ACC 305 WEEK 8 QUIZ

Multiple Choice Question 45

Dream Home Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2015. In 2015, it changed to the percentage-of-completion method.
The company decided to use the same for income tax purposes. The tax rate enacted is 40%.
Income before taxes under both the methods for the past three years appears below.

Which of the following will be included in the journal entry made by Dream Home to record the income effect?

A debit to Retained Earnings for $150,000

 

A credit to Retained Earnings for $150,000

 

A debit to Retained Earnings for $100,000

 

A credit to Retained Earnings for $100,000

 

Multiple Choice Question 35

Which of the following describes a change in reporting entity?

A company divests itself of a European branch sales office.

 

Changing the companies included in combined financial statements.

 

A company acquires a subsidiary that is to be accounted for as a purchase.

 

A manufacturing company expands its market from regional to nationwide.

 

Multiple Choice Question 69

On December 31, 2015, Grantham, Inc. appropriately changed its inventory valuation method to FIFO cost from weighted-average cost for financial statement and income tax purposes. The change will result in a $2,500,000 increase in the beginning inventory at January 1, 2015. Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is

$1,750,000.

 

$2,500,000.

 

$0.

 

$750,000.

 

Multiple Choice Question 44

Dream Home Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2015. In 2015, it changed to the percentage-of-completion method.
The company decided to use the same for income tax purposes. The tax rate enacted is 40%.
Income before taxes under both the methods for the past three years appears below.

		2013		2014		2015
Completed contract		$300,000		$200,000		$100,000
Percentage-of-completion		500,000		250,000		180,000

What amount will be debited to Construction in Process account, to record the change at beginning of 2015?

$100,000

 

$150,000

 

$50,000

 

$250,000

 

IFRS Multiple Choice Question 06

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.”

IFRS

U.S. GAAP

 

Yes   Yes

 

No   Yes

 

Yes   No

 

No   No

 

Multiple Choice Question 37

	Your answer is correct.

An example of a correction of an error in previously issued financial statements is a change

from the FIFO method of inventory valuation to the LIFO method.

 

from the cash basis of accounting to the accrual basis of accounting.

 

in the tax assessment related to a prior period.

 

in the service life of plant assets, based on changes in the economic environment.

 

Multiple Choice Question 70

On January 1, 2015, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $700,000 increase in the January 1, 2015 inventory. Assume that the income tax rate for all years is 30%. The cumulative effect of the accounting change should be reported by Frost in its 2015

retained earnings statement as a $490,000 addition to the beginning balance.

 

income statement as a $490,000 cumulative effect of accounting change.

 

income statement as a $700,000 cumulative effect of accounting change.

 

retained earnings statement as a $700,000 addition to the beginning balance.

 

Multiple Choice Question 23

Which of the following is not a retrospective-type accounting change?

LIFO method to the FIFO method for inventory valuation

 

"Full cost" method to another method in the extractive industry

 

Sum-of-the-years'-digits method to the straight-line method

 

Completed-contract method to the percentage-of-completion method for long-term construction contracts

 

Multiple Choice Question 64

Link Co. purchased machinery that cost $1,800,000 on January 4, 2013. The entire cost was recorded as an expense. The machinery has a nine-year life and a $120,000 residual value. The error was discovered on December 20, 2015. Ignore income tax considerations.

Link's income statement for the year ended December 31, 2015, should show the cumulative effect of this error in the amount of

$1,426,667.

 

$1,613,333.

 

$1,240,000.

 

$0.

 

Multiple Choice Question 27

A company changes from percentage-of-completion to completed-contract method, which is used for tax purposes. The entry to record this change should include a

debit to Retained Earnings in the amount of the difference on prior years, net of tax.

 

credit to Deferred Tax Liability.

 

debit to Construction in Process.

 

debit to Loss on Long-term Contracts in the amount of the difference on prior years, net of tax.

 

Multiple Choice Question 68

Which of the following should be reported as a prior period adjustment?

Change in Estimated Lives of Depreciable Assets

Change from Unaccepted Principle to Accepted Principle

 

No   No

 

No   Yes

 

Yes   No

 

Yes   Yes

 

Multiple Choice Question 24

Which of the following is accounted for as a change in accounting principle?

A change from expensing immaterial expenditures to deferring and amortizing them as they become material.

 

A change from the cash basis of accounting to the accrual basis of accounting.

 

A change in the estimated useful life of plant assets.

 

A change in inventory valuation from average cost to LIFO.

 

Multiple Choice Question 74

On January 1, 2014, Janik Corp. acquired a machine at a cost of $700,000. It is to be depreciated on the straight-line method over a five-year period with no residual value. Because of a bookkeeping error, no depreciation was recognized in Janik's 2014 financial statements. The oversight was discovered during the preparation of Janik's 2015 financial statements. Depreciation expense on this machine for 2015 should be

$140,000.

 

$175,000.

 

$0.

 

$280,000.

 

Multiple Choice Question 48

On January 1, 2012, Nobel Corporation acquired machinery at a cost of $1,200,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2015, a decision was made to change to the double-declining balance method of depreciation for this machine.

The amount that Nobel should record as depreciation expense for 2015 is

$168,000.

 

$240,000.

 

none of these are correct.

 

$120,000.