Day 5

Question 1

The cumulative effect of an accounting principal change is shown as:

Answer 1

An adjustment to beginning Retained Earnings

MCQ-00063

Question 2

Rule: The cumulative effect of a change in accounting principal equals:

Answer 2

The difference between RE at the beginning of the period of change and what RE would have been if the change was applied to all affected periods

MCQ-00090

Question 3

Under GAAP what inventory change is considered impractical to calculate the cumulative effect?

Answer 3

LIFO to Weighted Average

MCQ-00219

Question 4

How is a change in depreciation method accounted for?

Answer 4

It is a change in accounting principal and estimate therefore it defaults to a change in accounting estimate and is accounted for prospectively

MCQ-00221

Question 5

The FS are presented with comparative information. How is a change from LIFO to FIFO accounting principal presented?

Answer 5

As an adjustment to the Year 2 inventory balance with an offsetting adjustment to beginning RE

MCQ-08723

Question 6

ABC Inc changed from cash basis accounting to accrual. The cumulative effect of this change should be reported on ABCs current year FS as:

Answer 6

Prior period adjustment resulting from a correction of error

MCQ-00051