E 20-18 Classifying accounting changes assignment
Indicate with the appropriate letter the nature of each situation described below:
Change in principle reported retrospectively
Change in principle reported prospectively
Change in estimate
Change in estimate resulting from a change in principle
Change in reporting entity
Not an accounting change
Exercise 20-18
- Change from decreasing balance depreciation to straight-line.
- Change in the approximated useful life of office equipment.
- Technological improvement which renders useless a patent with an
unamortized cost of $45,000.
- Change from finding lower of cost or market for stocks by the
individual item approach to the aggregate approach.
- Change from LIFO stock costing to weighted-average stock costing.
- Settling a legal case for under the sum accrued earlier as a loss
contingency.
- Including in the combined fiscal reports a subsidiary purchased many
years ago which was properly not included in earlier years.
- Change by a store from revealing bad debt expenditure on a pay-as-you-
go basis to the allowance method.
- A change of specific production overhead costs to stock which earlier
were expensed as incurred to more accurately measure cost of goods sold. (Either method is typically accepted.)
- Pension plan assets for a specified benefit pension plan having a rate of
return more than the sum expected.
*Error correction: change from an unacceptable method to GAAP.