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Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2018 bef
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Answer #1
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.
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