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1. XYZ Inc. changes its method of valuation of inventories from weighted-average method to first-in, first-out (FIFO) method. XYZ Inc. should account for this change as (a) A change in estimate and account for it prospectively. (b) A change in accounting policy and account for it prospectively. (c) A change in accounting policy and account for it retrospectively. (d) Account for it as a correction of an error and account for it retrospectively. 2. Change in accounting policy does not include (a) Change in useful life from 10 years to 7 years. (b) Change of method of valuation of inventory from FIFO to weighted-average. (c) Change of method of valuation of inventory from weighted- average to FIFO. (d) Change from the practice (convention) of paying as Christmas bonus one month's salary to staff before the end of the year to the new practice of paying one-half month's salary only.

1. XYZ Inc. changes its method of valuation of inventories from weighted-average method to first-in, first-out (FIFO) method. XYZ Inc. should account for this change as (a) A change in estimate and account for it prospectively. (b) A change in accounting policy and account for it prospectively. (c) A change in accounting policy and account for it retrospectively. (d) Account for it as a correction of an error and account for it retrospectively. 2. Change in accounting policy does not include (a) Change in useful life from 10 years to 7 years. (b) Change of method of valuation of inventory from FIFO to weighted-average. (c) Change of method of valuation of inventory from weighted- average to FIFO. (d) Change from the practice (convention) of paying as Christmas bonus one month's salary to staff before the end of the year to the new practice of paying one-half month's salary only.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. XYZ Inc. changes its method of valuation of inventories from weighted-average method to first-in, first-out (FIFO) method. XYZ Inc. should account for this change as (a) A change in estimate and account for it prospectively. (b) A change in accounting policy and account for it prospectively. (c) A change in accounting policy and account for it retrospectively. (d) Account for it as a correction of an error and account for it retrospectively. 2. Change in accounting policy does not include (a) Change in useful life from 10 years to 7 years. (b) Change of method of valuation of inventory from FIF0 to weighted-average. (c) Change of method of valuation of inventory from weighted- average to FIFO. (d) Change from the practice (convention) of paying as Christmas bonus one month's salary to staff before the end of the year to the new practice of paying one-half month's salary only. 3. When a public shareholding company changes an accounting policy voluntarily, it has to (a) Inform shareholders prior to taking the decision. (b) Account for it retrospectively. (c) Treat the effect of the change as an extraordinary item. (d) Treat it prospectively and adjust the effect of the change in the current period and future periods. 4. When it is difficult to distinguish between a change of estimate and a change in accounting policy, then an entity should (a) Treat the entire change as a change in estimate with appropriate disclosure. (b) Apportion, on a reasonable basis, the relative amounts of change in estimate and the change in accounting policy and treat each one accordingly. (c) Treat the entire change as a change in accounting policy. (d) Since this change is a mixture of two types of changes, it is best if it is ignored in the year of the change; the entity should then wait for the following year to see how the change develops and then treat it accordingly. 5. When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should (a) Retrospectively change the depreciation charge based on the revised salvage value. (b) Change the depreciation charge and treat it as a correction of an error. (c) Change the annual depreciation for the current year and future years. (d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expeetad to be raeovarad in future
Transcribed Image Text:1. XYZ Inc. changes its method of valuation of inventories from weighted-average method to first-in, first-out (FIFO) method. XYZ Inc. should account for this change as (a) A change in estimate and account for it prospectively. (b) A change in accounting policy and account for it prospectively. (c) A change in accounting policy and account for it retrospectively. (d) Account for it as a correction of an error and account for it retrospectively. 2. Change in accounting policy does not include (a) Change in useful life from 10 years to 7 years. (b) Change of method of valuation of inventory from FIF0 to weighted-average. (c) Change of method of valuation of inventory from weighted- average to FIFO. (d) Change from the practice (convention) of paying as Christmas bonus one month's salary to staff before the end of the year to the new practice of paying one-half month's salary only. 3. When a public shareholding company changes an accounting policy voluntarily, it has to (a) Inform shareholders prior to taking the decision. (b) Account for it retrospectively. (c) Treat the effect of the change as an extraordinary item. (d) Treat it prospectively and adjust the effect of the change in the current period and future periods. 4. When it is difficult to distinguish between a change of estimate and a change in accounting policy, then an entity should (a) Treat the entire change as a change in estimate with appropriate disclosure. (b) Apportion, on a reasonable basis, the relative amounts of change in estimate and the change in accounting policy and treat each one accordingly. (c) Treat the entire change as a change in accounting policy. (d) Since this change is a mixture of two types of changes, it is best if it is ignored in the year of the change; the entity should then wait for the following year to see how the change develops and then treat it accordingly. 5. When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should (a) Retrospectively change the depreciation charge based on the revised salvage value. (b) Change the depreciation charge and treat it as a correction of an error. (c) Change the annual depreciation for the current year and future years. (d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expeetad to be raeovarad in future
1. Which of the following reports is not a component of the financial statements according to IAS 1? (a) Balance sheet. (b) Statement of changes in equity. (c) Director’s report. (d) Notes to the financial statements. 2. XYZ Inc. decided to extend its reporting period from a year (12-month period) to a 15-month period. Which of the following is not required under IAS 1 in case of change in reporting period? (a) XYZ Inc. should disclose the reason for using a longer period than a period of 12 months. (b) XYZ Inc. should change the reporting period only if other similar entities in the geographical area in which it generally operates have done so in the current year; otherwise its financial statements would not be comparable to others. (c) XYZ Inc. should disclose that comparative amounts used in the financial statements are not entirely comparable. 3. Which of the following information is not specifically a required disclosure of IAS 1? (a) Name of the reporting entity or other means of identification, and any change in that information from the previous year. (b) Names of major/significant shareholders of the entity. (c) Level of rounding used in presenting the financial statements. (d) Whether the financial statements cover the individual entity or a group of entities. 4. Which one of the following is not required to be presented as minimum information on the face of the balance sheet, according to IAS 1? (a) Investment property. (b) Investments accounted under the equity method. (c) Biological assets. (d) Contingent liability. 5. When an entity opts to present the income statement classifying expenses by function, which of the following is not required to be disclosed as "additional information"? (a) Depreciation expense. (b) Employee benefits expense. (c) Director's remuneration. (d) Amortization expense.
Transcribed Image Text:1. Which of the following reports is not a component of the financial statements according to IAS 1? (a) Balance sheet. (b) Statement of changes in equity. (c) Director’s report. (d) Notes to the financial statements. 2. XYZ Inc. decided to extend its reporting period from a year (12-month period) to a 15-month period. Which of the following is not required under IAS 1 in case of change in reporting period? (a) XYZ Inc. should disclose the reason for using a longer period than a period of 12 months. (b) XYZ Inc. should change the reporting period only if other similar entities in the geographical area in which it generally operates have done so in the current year; otherwise its financial statements would not be comparable to others. (c) XYZ Inc. should disclose that comparative amounts used in the financial statements are not entirely comparable. 3. Which of the following information is not specifically a required disclosure of IAS 1? (a) Name of the reporting entity or other means of identification, and any change in that information from the previous year. (b) Names of major/significant shareholders of the entity. (c) Level of rounding used in presenting the financial statements. (d) Whether the financial statements cover the individual entity or a group of entities. 4. Which one of the following is not required to be presented as minimum information on the face of the balance sheet, according to IAS 1? (a) Investment property. (b) Investments accounted under the equity method. (c) Biological assets. (d) Contingent liability. 5. When an entity opts to present the income statement classifying expenses by function, which of the following is not required to be disclosed as "additional information"? (a) Depreciation expense. (b) Employee benefits expense. (c) Director's remuneration. (d) Amortization expense.
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