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    Notes Quiz PDF

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    kim che
    1. The document discusses accounting policies regarding changes in estimates versus errors. A change in estimate is based on new information, while an error is the result of a mistake. 2. Several examples are provided to demonstrate the difference between a change in estimate versus a change in accounting policy. A change in depreciation method is a change in estimate, while reducing the life of a patent due to new conditions is actually a change in policy. 3. The document also includes problems related to inventory errors and their impact on financial statements over multiple periods. The problems must be solved to determine the effects of the various errors.

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    Notes Quiz PDF

    Uploaded by

    kim che
    420 views2 pages
    1. The document discusses accounting policies regarding changes in estimates versus errors. A change in estimate is based on new information, while an error is the result of a mistake. 2. Several examples are provided to demonstrate the difference between a change in estimate versus a change in accounting policy. A change in depreciation method is a change in estimate, while reducing the life of a patent due to new conditions is actually a change in policy. 3. The document also includes problems related to inventory errors and their impact on financial statements over multiple periods. The problems must be solved to determine the effects of the various errors.

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    1. The document discusses accounting policies regarding changes in estimates versus errors. A change in estimate is based on new information, while an error is the result of a mistake. 2. Several examples are provided to demonstrate the difference between a change in estimate versus a change in accounting policy. A change in depreciation method is a change in estimate, while reducing the life of a patent due to new conditions is actually a change in policy. 3. The document also includes problems related to inventory errors and their impact on financial statements over multiple periods. The problems must be solved to determine the effects of the various errors.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    420 views2 pages

    Notes Quiz PDF

    Uploaded by

    kim che
    1. The document discusses accounting policies regarding changes in estimates versus errors. A change in estimate is based on new information, while an error is the result of a mistake. 2. Several examples are provided to demonstrate the difference between a change in estimate versus a change in accounting policy. A change in depreciation method is a change in estimate, while reducing the life of a patent due to new conditions is actually a change in policy. 3. The document also includes problems related to inventory errors and their impact on financial statements over multiple periods. The problems must be solved to determine the effects of the various errors.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Notes

    TRUE OR FALSE – ACCOUNTING POLICIES, CHANGES IN ESTIMATES & ERRORS

    1. The primary distinction between a change in accounting estimate and the correction of an error is
    the timing of availability of information; a change in estimate is based on new information not
    previously available. TRUE

    0. All changes in accounting policy are accounted for by retrospective application. FALSE

    0. A company changes its depreciation method for machinery and equipment from sum-of-the-
    years'-digits depreciation to the straight-line method. This is a change in accounting
    estimate. TRUE

    0. A company reduces the lives of several patents from 17 to 10 years because of rapid
    technological change. This is a change in accounting policy. FALSE

    0. An analysis of the allowance for doubtful accounts showed the balance should be reduced
    by ₱27,500 due to recent changes in economic conditions. This is a change in accounting
    estimate. TRUE

    0. A company changes from a non-acceptable to an acceptable accounting principle. This is a


    change in accounting policy. FALSE

    0. A company changes its depreciation method at the same time it recognizes a change in the
    estimated useful life of the asset. This is a change in accounting policy.FALSE

    0. The understatement of merchandise inventory is an example of an error that counterbalances


    after two years. TRUE

    0. Failure to record amortization is an example of a non-counter balancing error. TRUE

    0. An understatement in ending inventory results to overstatement of profit during the period.


    FALSE

    PROBLEMS

    11.Assume that no correcting entries were made at December 31, 20x1, or December 31, 20x2, and
    that no additional errors occurred in 20x3. Ignoring income taxes, by how much will working capital
    at December 31, 20x3, be overstated or understated?
    a. ₱0. c. ₱1,000 understated.
    b. ₱1,000 overstated. d. ₱1,700 understated.

    12.Bren Co.'s beginning inventory at January 1, 20x3, was understated by ₱26,000, and its ending
    inventory was overstated by ₱52,000. As a result, Bren's cost of goods sold for 20x3 was
    a. Understated by ₱26,000. c. Understated by ₱78,000.
    b. Overstated by ₱26,000. d. Overstated by ₱78,000.
    The next three items are based on the following:
    The bookkeeper of Latsch Company, which has an accounting year ending December 31, made the
    following errors:
     A ₱1,000 collection from a customer was received on December 29, 20x0, but not recorded until
    the date of its deposit in the bank, January 4, 20x1.
     A supplier's ₱1,600 invoice for inventory items received in December 20x0 was not recorded until
    January 20x1. (Inventories at December 31, 20x0 and 20x1, were stated correctly, based on physical
    count.)
     Depreciation for 20x0 was understated by ₱900. In September 20x0, a ₱200 invoice for office
    supplies was charged to the Utilities Expense account. Office supplies are expensed as purchased.
     December 31, 20x0, sales on account of ₱3,000 were recorded in January 20x1.

    Assume that no other errors have occurred and that no correcting entries have been made. Ignore
    income taxes. 

    13.Profit for 20x0 was


    a. Understated by ₱500. c. Overstated by ₱2,500.
    b. Understated by ₱2,100. d. Neither understated nor overstated.

    14.Assume the same facts as above. Working capital at December 31, 20x0, was
    a. Understated by ₱3,000. c. Understated by ₱1,400.
    b. Understated by ₱500. d. Neither understated or overstated.

    15.Assume the same facts as above. Total assets at December 31, 20x0, were
    a. Overstated by ₱2,500. c. Understated by ₱2,500.
    b. Overstated by ₱2,100. d. None of the above.

    “Do not be anxious about anything, but in everything by prayer and supplication with
    thanksgiving let your requests be made known to God. And the peace of God, which surpasses
    all understanding, will guard your hearts and your minds in Christ Jesus.” (Philippians 4:6-7)

    - END -

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