Chapter 22: Accounting for Changes and Errors
Exhibit 22-2
On January 1, 2017, Nathan, Inc. purchased a machine for $56,000. Eight-year, straight-line depreciation with no
salvage value was used through December 31, 2018. On January 1, 2019, it was estimated that the total useful life of
the machine from acquisition date was ten years.
53. Refer to Exhibit 22-2. what is the amount of the adjusting entry that should be made on January 1, 2019?
a.
$6,000
b.
$3,600
c.
$2,400
d.
$0
d
1
Moderate
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
54. Refer to Exhibit 22-2. Accordingly, the appropriate accounting change was made in 2019. How much depreciation
expense for this machine should Nathan record for the year ended December 31, 2019?
a.
$4,200
b.
$5,250
c.
$7,000
d.
$0
b
1
Moderate
ACCT.WHAL.16.22.4 – LO: 22.4
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
55. Which of the following should be reported as a change in accounting estimate?
a.
change in the reported beginning inventory amount due to a discovery of a bookkeeping error
b.
increase in bad debt rate applied to net sales
c.
change from completed-contract method to the percentage-of-completion for revenue recognition
d.
change made to comply with a new FASB pronouncement
b
1
Easy
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
56. Which of the following is the proper time period in which to record a change in accounting estimate?
a.
current period and future periods
b.
current period and retroactively
c.
retroactively only
d.
current period only
a
1
Easy
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
57. When a change in method is inseparable from a change in estimate, the change is accounted for
a.
b.
c.
d.
a
1
Easy
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
58. A change in unit depletion rate would be accounted for as a
a.
correction of an accounting error.
b.
change in accounting principle.
c.
change in accounting estimate.
d.
change in accounting estimate effected through a change in accounting principle.
c
1
Easy
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
59. Lilly Company has been depreciating equipment for 10 years with an estimated total useful life of 25 years. Lilly has
revised the estimated life to be only 17 years, with 7 years remaining in the asset’s useful life. What is the appropriate
action that Lilly should do now?
a.
record a change in estimate by recomputing depreciation of prior periods and restating prior period financial
results accordingly
b.
record a change in estimate by recomputing depreciation of prior periods and presenting the net depreciation
adjustment as a cumulative effect change in accounting principle in the current period
c.
continue to depreciate the equipment over the original 25-year life
d.
depreciate the remaining book value over the remaining 7 years of the asset’s useful life
d
1
Challenging
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Evaluating
Chapter 22: Accounting for Changes and Errors
Exhibit 22-3
Katrina Company acquired a truck on January 1, 2016, for $140,000. The truck had an estimated useful life of five
years with no salvage value. Katrina used straight-line depreciation for the truck. On January 1, 2017, Katrina revises
the estimated useful life of the truck. Katrina made the accounting change in 2017 to reflect the extended useful life.
60. Refer to Exhibit 22-3. If the revised estimated useful life of the truck is a total of seven years, and assuming an income
tax rate of 35%, what is the amount of the prior-years effect that Katrina should report in its 2017 income statement as
a result of changing the useful life of the truck?
a.
$0
b.
$5,600
c.
$16,800
d.
$58,800
a
1
Moderate
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
61. Refer to Exhibit 22-3. If the revised estimated useful life of the truck is a total of eight years, what is the amount of
depreciation expense that Katrina should report in its 2017 income statement?
a.
$14,000
b.
$16,000
c.
$17,500
d.
$28,000
b
1
Moderate
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
62. Lavender Company purchased a machine on January 1, 2016, for $80,000. The machine has an estimated useful life of
5 years with a salvage value of $10,000. It is being depreciated using the straight-line method. On January 1, 2018,
Lavender reevaluated the machine’s useful life and now believes it will continue for another 5 years (for a total of 7
years) and have no salvage value at the end of its useful life. What is the amount of depreciation expense related to
this machine for the year ended December 31, 2018?
a.
$14,000
b.
$10,400
c.
$8,400
d.
$7,430
b
1
Moderate
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
63. During 2018, Dragon Company determined, based on new information, that equipment previously depreciated using a
ten-year life and a salvage value of $100,000 had a total estimated life of only six years and a salvage value of
$50,000. The equipment was acquired on January 1, 2016 at a cost of $600,000, and was depreciated using the
straight-line method. Dragon made an accounting change in 2018 to reflect this additional information, and the change
was approved by the IRS. Dragon has an income tax rate of 30%. Dragon’s income before depreciation, before income
taxes, and before any retroactive effect of the accounting change (if any) for the year ended December 31, 2018, was
$180,000. What is the amount of Dragon’s net income for 2018?
a.
$80,000
b.
$67,500
c.
$56,000
d.
$47,250
d
1
Moderate
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
64. Margaret Company purchased equipment on January 1, 2014, for $500,000. At the date of acquisition, the equipment
had an estimated useful life of eight years with a $50,000 salvage value, and it was depreciated using the straight-line
method. On January 1, 2019, based on updated information, Margaret decided that the equipment had a total
estimated life of ten years and no salvage value. What is the amount of depreciation expense on the equipment in
2019?
a.
$56,250
b.
$45,000
c.
$21,875
d.
$43,750
d
1
Moderate
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
65. A company changes from capitalizing and amortizing preproduction costs to recording them as an expense when
incurred, because future benefits associated with those costs have become doubtful. This accounting change should be
recognized as a
a.
change in accounting estimate.
b.
change in accounting principle.
c.
change in reporting entity.
d.
correction of an error.
a
1
Easy
ACCT.WHAL.16.22.3 – LO: 22.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
66. All of the following are considered to be changes in accounting entities that require retrospective restatement of past
financial statements except
a.
there is a change in the specific subsidiaries that make up the group of companies that are consolidated when
financial statements are presented.
b.
consolidated or combined statements are presented in place of the statements of individual companies.
c.
the companies included in the combined financial statements change.
d.
a company acquires a trademark and changes the name of its business operations.
d
1
Easy
ACCT.WHAL.16.22.4 – LO: 22.4
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
67. If consolidated statements are presented for the first time instead of statements of several individual companies, this
change should be accounted for
a.
retrospectively.
b.
prospectively.
c.
by cumulative effect adjustment.
d.
by footnote disclosure only.
a
1
Easy
ACCT.WHAL.16.22.4 – LO: 22.4
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
68. Which of the following accounting treatments is proper for a change in reporting entity?
a.
restatement of all financial statements presented
b.
restatement of current period financial statements
c.
note disclosure and supplementary schedules
d.
adjustment to retained earnings and note disclosure
a
1
Easy
ACCT.WHAL.16.22.4 – LO: 22.4
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
69. On December 31, 2016, the Maggie Company recognized $15,000 in revenue from rent of $5,000 due in 2017 and
$10,000 due in 2018, all collected in advance from another company. Ignoring income taxes, if this error is not
detected
a.
Retained Earnings at December 31, 2017, will be overstated by $10,000.
b.
Retained Earnings at December 31, 2017, will be understated by $10,000.
c.
Retained Earnings will be overstated by $15,000 until the error is discovered.
d.
Retained Earnings at December 31, 2017, will be understated by $15,000.
a
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
70. Which of the following errors will normally result in overstatement of 2017 net income?
a.
failure to record merchandise purchases in 2016
b.
understatement of 2016 ending merchandise inventory
c.
failure to record accrued salaries expense in 2016
d.
overstatement of prepaid expense in 2016
b
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
71. A company accounts for the correction of a material error of a past period that it discovers in the current period as
a.
a retrospective accounting change.
b.
an adjustment to the current period.
c.
a prospective adjustment.
d.
a prior period restatement.
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
Bloom’s: Remembering
72. Which of the following errors normally would not be automatically corrected over two accounting periods?
a.
failure to record prepaid revenue
b.
failure to record accrued payroll liabilities
c.
failure to record depreciation expense
d.
failure to count inventory in transit at year-end
c
1
Easy
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
73. Eliza Company discovered the following errors in 2016:
·
Ending inventory at December 31, 2015, was understated by $2,000.
·
Accrued expenses of $3,000 were not recorded at December 31, 2015.
Eliza reported net income of $45,000 for the year 2015. What is the amount of the corrected net income (ignoring
income taxes) for 2015?
a.
$45,000
b.
$40,000
c.
$46,000
d.
$44,000
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
74. The correct 2016 net income for Magness Company, after error corrections, was $56,000. Two errors were found after
net income was first reported. The January 1, 2016 inventory and the December 31, 2016, inventory were overstated
by $5,000 and $10,000, respectively. What is the amount of the net income that must have been originally reported?
a.
$41,000
b.
$66,000
c.
$71,000
d.
$61,000
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
75. On January 1, 2016, Tessa loaned $12,000 to another company on a three-year, 4% note. No interest was accrued in
2016. Cash will not be received for the interest until the end of the three-year period. The error was discovered before
adjusting and closing entries were posted on December 31, 2017. Ignoring income taxes, what should be the correct
journal entry on December 31
a.
Interest Receivable 480
Retained Earnings 480
b.
Interest Receivable 960
Interest Revenue 960
c.
Interest Receivable 480
Interest Revenue 480
d.
Interest Receivable 960
Interest Revenue 480
Retained Earnings 480
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
76. Walter Co. made the following errors in 2016:
·
Ending inventory was overstated by $2,000.
·
Beginning inventory was understated by $6,000.
·
Purchases were overstated by $3,000.
Reported net income was $20,000. What is the correct amount of 2016 net income?
a.
$19,000
b.
$21,000
c.
$15,000
d.
$4,000
c
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
77. Bethany Corp. reported $80,000 of net income for 2016. The following errors were then discovered:
·
Ending 2016 accrued expense was overstated by $2,000.
·
2016 earned revenue was overstated by $3,000.
·
Ending 2016 prepaid expense was overstated by $500.
Ignoring income taxes, what is the correct amount of 2016 net income?
a.
$85,500
b.
$84,500
c.
$78,500
d.
$76,500
c
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
78. Leah Co. reported $7,000 of net income for 2016. The following errors were then discovered:
·
Ending 2015 accrued expense was understated by $800.
·
Ending 2016 unearned revenue was overstated by $75.
·
Ending 2015 unearned revenue was overstated by $380.
Ignoring income taxes, what is the correct amount of 2016 net income?
a.
$6,505
b.
$5,895
c.
$7,495
d.
$6,655
c
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
79. An understatement of reported net income for the current year would result from
a.
an overstatement of ending inventory in the previous period.
b.
an overstatement of ending inventory in the current period.
c.
failure to record accrued payroll liabilities.
d.
failure to record expiration of prepaid insurance.
a
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
80. An understatement of reported net income for the current year may result from
a.
an understatement of beginning inventory in the previous period.
b.
an overstatement of ending inventory in the current period.
c.
failure to record accrued payroll liabilities.
d.
failure to record accrued interest revenue.
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
81. All of the following would be reported retrospectively by restating prior period’s financial results except
a.
change from the completed-contract method to the percentage-of-completion method for long-term
construction contracts.
b.
correction of an error in previous periods.
c.
change from LIFO to FIFO.
d.
change from the straight-line depreciation method to the sum-of-the-years’-digits method.
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
82. Langley Company received merchandise on December 31, 2016. Langley failed to record the purchase on account
because the invoice was inadvertently destroyed. The merchandise was, however, included in ending inventory. What
would be the effect of this event on the financial statements as of December 31, 2016?
a.
assets and liabilities would be understated
b.
assets and owners’ equity would be overstated
c.
liabilities would be understated and retained earnings overstated
d.
liabilities would be overstated and retained earnings understated
c
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
83. Mark Company overstated the beginning inventory on January 1, 2016, by $20,000. No other errors were identified. If
the error is not discovered, which of the following net income effects related to the inventory error are true?
Net Income
2015
2016
2017
I.
understated
overstated
correct
II.
overstated
understated
correct
III.
correct
understated
overstated
IV.
overstated
understated
overstated
a.
I
b.
II
c.
III
d.
IV
b
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
84. During a year-end evaluation of the financial records of the Matthew Company for the year ended December 31, 2016,
the following was discovered:
·
Inventory on January 1, 2016, was understated by $6,000.
·
Inventory on December 31, 2016, was understated by $18,000.
·
Rent of $20,000 collected in advance on December 29, 2016, was included in income for
2016.
·
A probable, reasonably estimated contingent liability of $30,000 was not recorded as of
December 31, 2016.
Net income for 2016 (before any of the above items) was $250,000. What is the corrected amount of net income for
2016? (Ignore income taxes.)
a.
$300,000
b.
$208,000
c.
$212,000
d.
$218,000
c
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
Chapter 22: Accounting for Changes and Errors
85. The December 31, 2016, ending inventory failed to include $25,000 of inventory that was received on December 27,
2016. The purchase on account was, however, properly recorded on the date of delivery. What effect will this error
have on the December 31, 2016, assets, liabilities, and net income for the year then ended?
Assets
Liabilities
Net Income
I.
overstated
overstated
no effect
II.
understated
understated
no effect
III.
understated
no effect
understated
IV.
understated
understated
understated
a.
I
b.
II
c.
III
d.
c
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
IV
Exhibit 22-4
Barbara Company’s year-end December 31, 2016, financial statements contained the following errors:
·
Ending inventory on December 31, 2016, was overstated by $75,000.
·
Depreciation expense was understated by $7,000.
·
A two-year insurance policy for 2016 and 2017 in the amount of $14,000 was entirely
expensed in 2016.
·
Investments in common stock of other companies were sold in 2016 at a gain of $10,000, but
the sale was not recorded until 2017.
86. Refer to Exhibit 22-4. What is the effect of the above errors on 2016 net income?
a.
Net income is understated by $65,000.
b.
Net income is overstated by $92,000.
c.
Net income is overstated by $58,000.
d.
Net income is overstated by $65,000.
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
Bloom’s: Analyzing
87. Refer to Exhibit 22-4. The effect of the above errors on the December 31, 2016, reported assets of Barbara is that
assets are
a.
understated by $65,000.
b.
overstated by $92,000.
c.
overstated by $58,000.
d.
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
Bloom’s: Analyzing
overstated by $65,000.
Exhibit 22-5
Daniel Company, having a fiscal year ending on December 31, discovered the following errors in 2016:
·
A collection of $12,000 from a customer for rent related to January, 2017, was recorded as
revenue in 2016.
·
Depreciation was understated by $600 in 2016.
·
The January 1, 2015, inventory was overstated by $10,000.
·
The January 1, 2016, inventory was understated by $6,000.
·
Insurance premiums of $2,000 that relate to 2017 were expensed in 2016 when paid.
Assume no other errors have occurred and ignore income taxes.
88. Refer to Exhibit 22-5. Net income for 2016 was
a.
overstated by $4,600.
b.
overstated by $16,600.
c.
understated by $5,400.
d.
understated by $5,200.
b
1
Moderate
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
89. Refer to Exhibit 22-5. Total assets at December 31, 2016, were
a.
overstated by $1,400.
b.
overstated by $4,600.
c.
understated by $4,600.
d.
understated by $1,400.
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
Exhibit 22-6
North Company has a fiscal year ending on December 31. Its financial statements for the years ended December 31,
2016 and 2017 contained the following errors:
2016
2017
Ending inventory
$19,000 understated
$15,000 overstated
Bad debt expense
2,000 overstated
1,000 understate
Assume no correcting entries have been made.
90. Refer to Exhibit 22-6. By how much was North’s 2016 net income overstated or understated?
a.
$21,000 overstated
b.
$17,000 overstated
c.
$17,000 understated
d.
$21,000 understated
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
91. Refer to Exhibit 22-6. By how much was North’s 2017 net income overstated or understated?
a.
$23,000 understated
b.
$14,000 overstated
c.
$7,000 understated
d.
$35,000 overstated
d
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
92. Exceptions exist in the retrospective restatement requirements when accounting for errors under
GAAP
IFRS
I.
No
No
II.
No
Yes
III.
Yes
Yes
IV.
Yes
No
a.
I
b.
II
c.
III
d.
IV
b
1
Easy
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
93. IFRS differ from U.S. GAAP regarding the indirect effects of a change in accounting principle in that IFRS
a.
do not specify when the indirect effects should be reported or what disclosures are required.
b.
do not specify when the indirect effects should be reported.
c.
do not specify what disclosures are required.
d.
specify when the indirect effects should be reported and what disclosures are required.
a
1
Moderate
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
94. GAAP states that a change in accounting principle includes
a.
a change from one GAAP to another GAAP.
b.
a change in accounting principle because the principle formerly used is no longer generally accepted.
c.
a change in the method of applying an accounting principle.
d.
all of these choices.
d
1
Easy
ACCT.WHAL.16.22.2 – LO: 22.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
95. A change to GAAP from a principle that is not generally accepted
a.
requires a retrospective application of the new accounting principle.
b.
requires prospective treatment.
c.
requires a retrospective adjustment or restatement.
d.
is a correction of an error and accounted for by a prior-period adjustment.
d
1
Easy
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
96. The correction of an error in the financial statements of a prior period should be reflected, net of applicable income
taxes, in the current
a.
income statement after income from continuing operations and before extraordinary items.
b.
income statement after income from continuing operations and after extraordinary items.
c.
retained earnings statement after net income but before dividends.
d.
retained earnings statement as an adjustment of the opening balance.
d
1
Easy
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
Bloom’s: Remembering
97. Which of the following is a counterbalancing error?
a.
understated depletion expense
b.
bond premium under-amortized
c.
prepaid expense adjusted incorrectly
d.
overstated depreciation expenses
c
1
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
98. Which of the following is a noncounterbalancing error?
a.
accrued expenses not recognized at year-end
b.
accrued revenues that have not been collected or recognized at year-end
c.
depreciation expense overstated for the year
d.
prepaid expenses not recognized at year-end
c
1
Easy
ACCT.WHAL.16.22.5 – LO: 22.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling