Acct 557 week 5 quiz

ACCT 557 Intermediate Accounting III

(DeVry – Winter 2016)

Date Taken: ………../2016

Question Type:          # Of Questions:               

Multiple Choice                      5                          

Question 1.Question : (TCO E) Which of the following is not a retrospective-type accounting

change?

Question 2.Question : (TCO E) What type of accounting change/correction should always be

accounted for in the current and future accounting periods?

Question 3.Question : (TCO E) On December 31, 2013, Gifts Galore, Inc. appropriately changed

its inventory valuation method from weighted-average cost to FIFO

method for financial statement and income tax purposes. The change will

result in a $1,800,000 increase in the beginning inventory at January 1,

2013. Assume a 40% income tax rate. The cumulative effect of this

accounting change on beginning retained earnings is

Question 4.Question : (TCO E) As of January 1, 2011, Survival Industries, Inc. purchased a boat

at a cost of $490,000.

When purchased, the company was using the double declining

depreciation method.

Key info on the asset at time of purchase is the following.

Estimated useful life is 7 years.

Residual Value is $0.

At the beginning of 2014, the CFO decided to change to straight-line

depreciation method.

Compute the depreciation expense for 2014

Question 5.Question : (TCO E) Mystical Corporation found the following errors in their year-end

financial statements.

As of Dec. 2012 As of

Dec. 2013

Ending Inventory $32,000

understated $46,000 overstated

Depreciation Exp. $7,000 understated

On December 31, 2013, a fully depreciated machine was sold for $35,000

but the sale was not recorded until January 15, 2014 when the cash was

received. In 2012, a three-year insurance premium was prepaid for

$45,000 of which the entire amount was expensed in the first year.

There were no other errors or corrections. Ignore any tax considerations.

What is the total net effect of errors on Mystical’s 2013 Retained

Earnings?