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%.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.

  1. Change from LIFO to FIFO Inventory Method. - NEITHER
  2. Change in useful life of equipment from 10 years to 7 years. Accounting Error
  3. Change in depreciation method from Double Declining Balance to Straight Line.
  4. Write-down of inventory due to obsolescence.
  5. Settlement of lawsuit and receipt of damages from 5 years prior.
  6. Write-off of patent due to competing product.
  7. Prior year costs were recorded as expenses instead of Property, Plant and Equipment.
  8. 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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