For each situation, identify whether it is treated as a prior period adjustment or change in accounting estimate. 1. An assessment of expenses uncovers that the company incorrectly capitalized research and development costs three years ago. This error had a material effect on financial statements. 2. After using an expected useful life of seven years and no salvage value to depreciate its office equipment over the preceding three years, the company decided early this year that the equipment will last only two more years. 3. The company obtained a patent and estimated its useful life to be seventeen years. Five years later, the company reassesses the patent and now estimates that it has a remaining useful life of three years.
For each situation, identify whether it is treated as a prior period adjustment or change in accounting estimate. 1. An assessment of expenses uncovers that the company incorrectly capitalized research and development costs three years ago. This error had a material effect on financial statements. 2. After using an expected useful life of seven years and no salvage value to depreciate its office equipment over the preceding three years, the company decided early this year that the equipment will last only two more years. 3. The company obtained a patent and estimated its useful life to be seventeen years. Five years later, the company reassesses the patent and now estimates that it has a remaining useful life of three years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:For each situation, identify whether it is treated as a prior period adjustment or change in accounting estimate.
1. An assessment of expenses uncovers that the company incorrectly capitalized research and development costs three years ago.
This error had a material effect on financial statements.
2. After using an expected useful life of seven years and no salvage value to depreciate its office equipment over the preceding three
years, the company decided early this year that the equipment will last only two more years.
3. The company obtained a patent and estimated its useful life to be seventeen years. Five years later, the company reassesses the
patent and now estimates that it has a remaining useful life of three years.
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An assessment of expenses uncovers that the company incorrectly capitalized research and development costs three years
ago. This error had a material effect on financial statements.
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