Chapter 20, Problem 20.18E

Classifying accounting changes

• LO20–1 through LO20–5

Indicate with the appropriate letter the nature of each situation described below:

Type of Change

PR Change in principle reported retrospectively

PP Change in principle reported prospectively

E Change in estimate

EP Change in estimate resulting from a change in principle

R Change in reporting entity

N Not an accounting change

______ 1. Change from declining balance depreciation to straight-line

______ 2. Change in the estimated useful life of office equipment

______ 3. Technological advance that renders worthless a patent with an unamortized cost of $45,000

______ 4. Change from determining lower of cost or net realizable value (LCNRV) for the inventories by the individual item approach to the aggregate approach

______ 5. Change from LIFO inventory costing to the weighted-average inventory costing

______ 6. Settling a lawsuit for less than the amount accrued previously as a loss contingency

______ 7. Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years

______ 8. Change by a retail store from reporting warranty expense on a pay-as-you-go basis to estimating the expense in the period of sale

______ 9. A shift of certain manufacturing overhead costs to inventory that previously were expensed as incurred to more accurately measure cost of goods sold (Either method is generally acceptable)

______ 10. Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated