Financial Accounting
3rd Edition
ISBN: 9780078025549
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.14BE
Classify each of the following accounting practices as conservative or aggressive.
1. Increase the allowance for uncollectible accounts.
2. When costs are rising, change from LIFO to FIFO.
3. Change from declining-balance to straight-line
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
!
Required information
[The following information applies to the questions displayed below.]
Turtle Creek Partnership had the following revenues, expenses, gains, losses, and distributions:
Sales revenue
Long-term capital gains
Cost of goods sold
Depreciation-MACRS
Amortization of organization costs.
Guaranteed payments to partners for general management
Cash distributions to partners
$ 65,500
$ 4,800
Ordinary income (loss)
$ (22,100)
$ (7,900)
$ (1,240)
$ (15,600)
$ (3,600)
a. Given these items, what is Turtle Creek's ordinary business income (loss) for the year?
1. Depreciation is referring to the allocation of the depreciable amount over its estimated useful life.
TRUE/FALSE
2. Recording depreciation on non-current asset affects the statement of financial position and statement of profit or loss.
TRUE/FALSE
3. In calculating depreciation, both non-current asset cost and useful life are based on estimates.
TRUE/FALSE
4. Under reducing balance method, the depreciation rate used each year remains constant.
TRUE/FALSE
5. The book value of non-current asset is calculated as cost of the assets minus accumulated depreciation.
TRUE/FALSE
6. Estimated value of an asset at the end of its useful life is known as “salvage value”.
TRUE/FALSE
For each of the following subsequent events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.1. Settlement of a tax case at a cost considerably in excess of the amount expected at year-end.2. Introduction of a new product line.3. Loss of assembly plant due to fire.4. Sale of a significant portion of the company’s assets.5. Retirement of the company president.6. Issuance of a significant number of ordinary shares.7. Loss of a significant customer.8. Prolonged employee strike.9. Material loss on a year-end receivable because of a customer’s bankruptcy.10. Hiring of a new president.11. Settlement of prior year’s litigation against the company (no loss was accrued).12. Merger with another company of comparable size.
Chapter 12 Solutions
Financial Accounting
Ch. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - 5.In performing horizontal analysis, why is it...Ch. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - Prob. 15RQCh. 12 - Prob. 16RQCh. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 20RQCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Prob. 12.5BECh. 12 - Universal Sports Supply began the year with an...Ch. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Classify each of the following accounting...Ch. 12 - Classify each of the following accepted accounting...Ch. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Prob. 12.6ECh. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - The income statement for Stretch-Tape Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Prob. 12.12ECh. 12 - Prob. 12.13ECh. 12 - Prob. 12.14ECh. 12 - Distinguish between conservative and aggressive...Ch. 12 - Prob. 12.1APCh. 12 - Prob. 12.2APCh. 12 - Prob. 12.3APCh. 12 - Prob. 12.4APCh. 12 - Prob. 12.5APCh. 12 - Prob. 12.6APCh. 12 - Prob. 12.1BPCh. 12 - Prob. 12.2BPCh. 12 - Prob. 12.3BPCh. 12 - Prob. 12.4BPCh. 12 - Prob. 12.5BPCh. 12 - Prob. 12.6BPCh. 12 - Prob. 12.1APCPCh. 12 - Prob. 12.2APFACh. 12 - Prob. 12.3APFACh. 12 - Prob. 12.4APCACh. 12 - Prob. 12.5APECh. 12 - Prob. 12.7APWCCh. 12 - Prob. 12.8APEM
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The Typhoon Company discovers an understatement of depreciation in a prior year. What are the components of the journal entry required in the current year to correct this error? Select one: O a A debit to Depreciation Expense and a credit to Accumulated Depreciation O b. A debit to Retained Earnings and a credit to Depreciation Expense CA debit to Retained Earnings and a credit to Accumulated Depreciation Od A debit to Depreciation Expense and a credit to Retained Earnings Oe. A debit to Accumulated Depreciation and a credit to Depreciation Expense Clear my choicearrow_forwardFor 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%.arrow_forwardProvide the term that best describes the statement in Column A. In your answer book just write the letter from column A with the correct term from Column B. Column A Column B A. Resources controlled by the entity for less than one year as a result of a past event from which future economic benefits are expected to likely to flow into the entity. Allowances for credit losses adjustment B. The account credited when recording the depreciation adjustment. Accrual concept C. The supporting document used for the depreciation entry. Income received in advance D. The difference between the original cost and the accumulated depreciation of the asset. Accrued income E. When the selling price is less than the carrying value. Consumable stores on hand F. The concept where all expenses is assigned to the financial period in which they were incurred. Carrying value G. The account to be debited when recording the…arrow_forward
- Answer the following question: Which of the following is an example of a change in accounting policy? a) Switching from the double declining balance to the straight-line method of depreciation b) Adjusting the financial statements for an inventory count omission which occurred 2 years previously. c) Switching from a salvage value of $10,000 to a salvage value of $4,000 in the 3rd year of the equipment’s 8-year life. d) Using 5% for the allowance for bad debts instead of 3% because of the increased possibility of bankruptcy by customers. e) None of the other answers are correct.arrow_forwardWhich of the following would have an effect on the presentation of past years' comparable financial statements? Select one: O a. A component operation of the company is discontinued O b. Revising the estimated life of equipment Oc Correcting an error due to improper revenue recognition O d. Impairment of Goodwill Oe. Using MACRS to compute the depreciation of an asset for tax purposesarrow_forwardRequired: Indicate the effects of the following on the accounting equation. (Enter decreases to account categories as negative amounts and do not round your intermediate calculations.) 1. The adjustment for depreciation at the end of 2019. 2. The two expenditures during 2020 for (a) the major overhaul of the equipment and (b) repairs and maintenance.arrow_forward
- Which one of the following statement about encumbrance is correct? a. Encumbrances are equivalent to expenditures and encumbrances outstanding at the end of a year should be reported as assets b. None of the options c. Encumbrances are equivalent to expenditures and encumbrances outstanding at the end of a year should be reported as liabilities d. Encumbrances are recorded at the estimated cost of goods ordered or services contracted for. The subsequent amount recognized as expenditures upon receipt of the goods and services may differ from the encumbered amount.arrow_forwardWhich method of computing depreciation expense results in the same amount of depreciation each year? A. Straight line B. Double-declining balance C. Units-of-production D. Sum-of-years digits E. None of the abovearrow_forwardBecker Office Service purchased a new computer system on January 1, 2018, for $30,800. It is expected to have a five-year useful life and a $3,600 salvage value. Becker Office Service expects to use the computer system more extensively in the early years of its life. Required a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation. Salvage Value Useful Annual Year Cost Life Depreciation 1 2 3 4 b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. (Enter all amounts as positive values. Do not round intermediate calculations. Round "SL rate" answers to 2 decimal places. Round your answers to the nearest dollar amount.) Accumulated Depreciation Annual Beginning of Period (2 x SL Rate) Year Cost Depreciation 1 2 3 4arrow_forward
- b. Changes in measurement methods implied changes in accounting estimates. Choose TWO (2) of the following situations that specify changes in accounting estimates. i. ii. iii. iv. Revision of remaining useful life of equipment from 10 years to 8 years. An amount of RM15,000 receipt from account receivables was fraudulently credited to employee's bank account. Change of depreciation method of machinery from straight line to reducing balance. Change from measuring investment property using cost model to fair value model.arrow_forwardA company wishes to report the highest earnings possibleaccording to GAAP. Therefore, when calculating depreciation for financial reporting purposes,a. It will follow the MACRS depreciation rates prescribedby the IRS.b. It will estimate the shortest lives possible for itsassets.c. It will estimate the longest lives possible for its assets.d. It will estimate lower residual values for its assets.arrow_forward1. A restaurant has traditionally used the straight line method to depreciate all its heavy duty kitchen equipment. This year it decides to start using the double declining balance depreciation method on the same equipment. This change must be announced in the financial statements due to the _______ principle. Choices: a. Full disclosure principle b. Time period assumption c. Materiality constraint d. Cost Principle e. Revenue recognition principle f. Conservatism Constraint g. Matching principle h. Economic entity assumption i. Monetary unit j. Going concern k. Some other answersarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Accounting Changes and Error Analysis: Intermediate Accounting Chapter 22; Author: Finally Learn;https://www.youtube.com/watch?v=c2uQdN53MV4;License: Standard Youtube License