For each of the following independent scenarios, determine if each event is an accounting change, error, or neither. For each accounting change or error determine the method that should be used to account for the change or error in the current year financial statements: retrospective adjustment, prospective, or prior period adjustment.Change from LIFO to FIFO Inventory Method. - NEITHERChange in useful life of equipment from 10 years to 7 years. Accounting ErrorChange in depreciation method from Double Declining Balance to Straight Line.Write-down of inventory due to obsolescence.Settlement of lawsuit and receipt of damages from 5 years prior.Write-off of patent due to competing product.Prior year costs were recorded as expenses instead of Property, Plant and Equipment.Change in Allowance for Uncollectible Accounts due to increase in unpaid Accounts Receivable, changes estimate from 4% of credit sales to 6%.

Accounting changes: When a company requires to sacrifice the consistent accounting methods and…

Answered: For each of the following independent…

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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For each of the following independent scenarios, determine if each event is an accounting change, error, or neither. For each accounting change or error determine the method that should be used to account for the change or error in the current year financial statements: retrospective adjustment, prospective, or prior period adjustment.

Change from LIFO to FIFO Inventory Method. - NEITHER
Change in useful life of equipment from 10 years to 7 years. Accounting Error
Change in depreciation method from Double Declining Balance to Straight Line.
Write-down of inventory due to obsolescence.
Settlement of lawsuit and receipt of damages from 5 years prior.
Write-off of patent due to competing product.
Prior year costs were recorded as expenses instead of Property, Plant and Equipment.
Change in Allowance for Uncollectible Accounts due to increase in unpaid Accounts Receivable, changes estimate from 4% of credit sales to 6%.

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