Changes In Accounting Principle Quiz Questions
.
- 1.21. Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of
- A.
A. materiality.
- B.
B. consistency.
- C.
C. conservatism.
- D.
D. objectivity.
- 2.22. Which of the following is not treated as a change in accounting principle?
- A.
A. A change from LIFO to FIFO for inventory valuation
- B.
B. A change to a different method of depreciation for plant assets
- C.
C. A change from full-cost to successful efforts in the extractive industry
- D.
D. A change from completed-contract to percentage-of-completion
- 3.23. Which of the following is not a retrospective-type accounting change?
- A.
A. Completed-contract method to the percentage-of-completion method for long-term contracts
- B.
B. LIFO method to the FIFO method for inventory valuation
- C.
C. Sum-of-the-years'-digits method to the straight-line method
- D.
D. "Full cost" method to another method in the extractive industry
- 4.24. Which of the following is accounted for as a change in accounting principle?
- A.
A. A change in the estimated useful life of plant assets.
- B.
B. A change from the cash basis of accounting to the accrual basis of accounting.
- C.
C. A change from expensing immaterial expenditures to deferring and amortizing them as they become material.
- D.
D. A change in inventory valuation from average cost to FIFO.
- 5.25. A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a
- A.
A. credit to Accumulated Depreciation.
- B.
B. debit to Retained Earnings in the amount of the difference on prior years.
- C.
C. debit to Deferred Tax Asset.
- D.
D. credit to Deferred Tax Liability.
- 6.26. Which of the following disclosures is required for a change from sum-of-the-years-digits to straight-line?
- A.
A. The cumulative effect on prior years, net of tax, in the current retained earnings statement
- B.
B. Restatement of prior years’ income statements
- C.
C. Recomputation of current and future years’ depreciation
- D.
D. All of these are required.
- 7.27. A company changes from percentage-of-completion to completed-contract, which is the method used for tax purposes. The entry to record this change should include a
- A.
A. debit to Construction in Process.
- B.
B. debit to Loss on Long-term Contracts in the amount of the difference on prior years, net of tax.
- C.
C. debit to Retained Earnings in the amount of the difference on prior years, net of tax.
- D.
D. credit to Deferred Tax Liability.
- 8.28. Which of the following disclosures is required for a change from LIFO to FIFO?
- A.
A. The cumulative effect on prior years, net of tax, in the current retained earnings statement
- B.
B. The justification for the change
- C.
C. Restated prior year income statements
- D.
D. All of these are required.
- 9.29. Stone Company changed its method of pricing inventories from FIFO to LIFO. What type of accounting change does this represent?
- A.
A. A change in accounting estimate for which the financial statements for prior periods included for comparative purposes should be presented as previously reported.
- B.
B. A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be presented as previously reported.
- C.
C. A change in accounting estimate for which the financial statements for prior periods included for comparative purposes should be restated.
- D.
D. A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be restated.
- 10.30. Which type of accounting change should always be accounted for in current and future periods?
- A.
A. Change in accounting principle
- B.
B. Change in reporting entity
- C.
C. Change in accounting estimate
- D.
D. Correction of an error
- 11.31. Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate?
- A.
A. Current period and prospectively
- B.
B. Current period and retrospectively
- C.
C. Retrospectively only
- D.
D. Current period only
- 12.32. When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a
- A.
A. change in accounting principle.
- B.
B. change in accounting estimate.
- C.
C. prior period adjustment.
- D.
D. correction of an error.
- 13.34. Which of the following statements is correct?
- A.
A. Changes in accounting principle are always handled in the current or prospective period.
- B.
B. Prior statements should be restated for changes in accounting estimates.
- C.
C. A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate.
- D.
D. Correction of an error related to a prior period should be considered as an adjustment to current year net income.
- 14.35. Which of the following describes a change in reporting entity?
- A.
A. A company acquires a subsidiary that is to be accounted for as a purchase.
- B.
B. A manufacturing company expands its market from regional to nationwide.
- C.
C. A company divests itself of a European branch sales office.
- D.
D. Changing the companies included in combined financial statements.
- 15.36. Presenting consolidated financial statements this year when statements of individual companies were presented last year isa.
- A.
A. a correction of an error.
- B.
B. an accounting change that should be reported prospectively.
- C.
C. an accounting change that should be reported by restating the financial statements of all prior periods presented.
- D.
D. not an accounting change.
- 16.37. An example of a correction of an error in previously issued financial statements is a change
- A.
A. from the FIFO method of inventory valuation to the LIFO method.
- B.
B. in the service life of plant assets, based on changes in the economic environment.
- C.
C. from the cash basis of accounting to the accrual basis of accounting.
- D.
D. in the tax assessment related to a prior period.
- 17.38. Counterbalancing errors do not include
- A.
A. errors that correct themselves in two years.
- B.
B. errors that correct themselves in three years.
- C.
C. an understatement of purchases.
- D.
D. an overstatement of unearned revenue.
- 18.40. If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not record the purchase of these goods in its accounting records, these errors would cause
- A.
A. the ending inventory and retained earnings to be understated.
- B.
B. the ending inventory, cost of goods sold, and retained earnings to be understated.
- C.
C. no effect on net income, working capital, and retained earnings.
- D.
D. cost of goods sold and net income to be understated.
Questions: 13 | Attempts: 5298 | Last updated: May 22, 2022
-
Sample QuestionWhat is the entity concept?
Questions: 20 | Attempts: 1394 | Last updated: Mar 22, 2022
-
Sample QuestionThe personal assets of the owner of a company willnotappear on the company's balance sheet because of which principle/guideline?
Questions: 41 | Attempts: 80321 | Last updated: Mar 22, 2022
-
Sample QuestionThe purpose of the Conceptual Framework is:
Back to top