1) and 2) | ||
a) This is a estimate change. | ||
1) Record journal entry as a direct result of the change. | ||
No entry | ||
2)Record adjusting entry for change in warranty. | ||
Warranty expense (2% x $4,000,000) | 80000 | |
Estimated warranty liability | 80000 | |
b) This is a change in estimate. | ||
3)Record journal entry as a direct result of the change. | ||
No entry | ||
4) Record adjusting entry for depreciation. | ||
Depreciation expense | 45000 | |
Accumulated depreciation | 45000 | |
Initial cost of building | 1000000 | |
Old depreciation ($1000,000 ÷ 40 years) = $25000 | ||
Depreciation to date (2014-2017) = $25000 x 3years | 75000 | |
Undepreciated cost | 925000 | |
New estimated salvage value | -700000 | |
To be depreciated | 225000 | |
Estimated remaining life (2018-2022) | 5 | years |
New annual depreciation | 45000 | |
C) This is a change in accounting Principle that should be recorded | ||
5)Record journal entry as a direct result of the change | ||
No entry | ||
6) Record the adjusting entry for change in inventory cost method. | ||
No entry | ||
When a company changes to the LIFO inventory method from another inventory method, accounting records usually are insufficient to determine the cumulative income effect of the change necessary. | ||
d) This is a change in accounting estimate resulting from a change in accounting principle. | ||
7) Record journal entry as a direct result of the change. | ||
No Entry | ||
8)Record adjusting entry for depreciation. | ||
Depreciation expense | 24000 | |
Accumulated depreciation | 24000 | |
Initial cost of building | 330000 | |
Accumulated depreciation to date $330000x (10+9+8)/55 = | -162000 | |
Undepreciated cost | 168000 | |
New estimated salvage value | 0 | |
To be depreciated | 168000 | |
Estimated remaining life (10-3) | 7 | years |
New annual depreciation | 24000 | |
e)This is a change in estimate. | ||
9) Record journal entry as a direct result of the change. | ||
No Entry | ||
10)Record the adjusting entry for revision of liability. | ||
Loss- Litigation | 150000 | |
Liability - Litigation($350,000 -$200,000) | 150000 | |
f)This is a change in accounting principle | ||
11) Record journal entry as a direct result of the change. | ||
No Entry | ||
12)Record the adjusting entry for change in depreciation method from sum-of-the-years’-digits method to straight-line method. | ||
No Entry | ||
The change will be effective only for assets placed in service after the date of change, the change doesn’t affect assets depreciated in prior periods. | ||
Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2018...
Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 40% in all years. Any tax effects should be adjusted through the deferred tax liability account. Fleming Home Products introduced a new line of commercial awnings in 2017 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 3%...
Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 40% in all years. Any tax effects should be adjusted through the deferred tax liability account. a. Fleming Home Products introduced a new line of commercial awnings in 2017 that carry a one-year warranty against manufacturer's defects. Based on industry experience, warranty costs were expected to approximate...
Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 25% in all years. Any tax effects should be adjusted through the deferred tax liability account. Fleming Home Products introduced a new line of commercial awnings in 2020 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 3%...
Described below are six Independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 40% in all years. Any tax effects should be adjusted through the deferred tax liability account. a. Fleming Home Products Introduced a new line of commercial awnings in 2017 that carry a one year warranty against manufacturer's defects. Based on industry experience, warranty costs were expected to...
Problem 20-8 Accounting changes; six situations (LO20-1, 20-3, 20-4] Described below are six independent and unreliated stuations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closin entries were prepared Assume the tax rate for each company is 40% r, at years Any tax effects should be adjusted through the deferred tax lability account 30 a Fleming Home Products introduced a new line of commercial awnings in 2017 that carry a one-year warranty against manufacturer's defects...
Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 40 % in all years. Any tax effects should be adjusted through the deferred tax liability account a. Fleming Home Products introduced a new line of commercial awnings in 2017 that carry a one-year warranty against manufacturer's defects. Based on industry experience, warranty costs were expected to...
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries are prepared. a. On December 30, 2014, Rival Industries acquired its office building at a cost of $10,300,000. It has been depreciated on a straight- line basis assuming a useful life of 40 years and no residual value. Early in 2018, the estimate of useful life was revised to 28 years in total with no change in...
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries are prepared. a. On December 30, 2014, Rival Industries acquired its office building at a cost of $11,700,000. It has been depreciated on a straight- line basis assuming a useful life of 40 years and no residual value. Early in 2018, the estimate of useful life was revised to 28 years in total with no change in...
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries are prepared. On December 30, 2017, Rival Industries acquired its office building at a cost of $12,300,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2021, the estimate of useful life was revised to 28 years in total with no change in residual value....
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries are prepared. On December 30, 2017, Rival Industries acquired its office building at a cost of $10,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2021, the estimate of useful life was revised to 28 years in total with no change in residual value....