Special Issues

Question 1

Accounting error needs ______ period adjustment on current financial statements.

Answer 1

Prior

Question 2

Inflation, when a firm changes from FIFO to LIFO, _____states inventory.

Answer 2

Under

Question 3

What are effects of inflation?

Answer 3

Inventory UNDERSTATED
Assets UNDERstated

Question 4

Change in accounting principle is applied ________

Answer 4

Retrospectively

(Old and current Financial statements would be adjusted to follow new principle)

Question 5

Change in accounting estimate is applied ______

Answer 5

Prospectively

And adjusted in current financial statements only

Question 6

Concept: Market to book meaning in terms of stock being under or valued

Answer 6

> 1 Ideal and undervalued

Question 7

Accounting errors involves making making an adjustment in _____ and a corresponding amount in ______

Answer 7

ASSET/Liability, RETAINED EARNINGS

Question 8

Definition: Accounting Error

Answer 8

Error due to math mistake, applying accounting principle incorrectly, or misinterpreting facts in FS prep

Question 9

When changes are made due to changes in accounting principle, the adjustment of the cumulative effective is applied to retained earnings of which year?

Answer 9

the earliest year presented