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Chapter 22 Quiz

1. A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a
a. credit to Accumulated Depreciation.
b. debit to Retained Earnings in the amount of the difference on prior years.
c. debit to Deferred Tax Asset.
d. credit to Deferred Tax Liability.

2. Which type of accounting change should always be accounted for in current and future periods?
a. Change in accounting principle
b. Change in reporting entity
c. Change in accounting estimate
d. Correction of an error

3. Presenting consolidated financial statements this year when statements of individual companies were presented last year is
a. a correction of an error.
b. an accounting change that should be reported prospectively.
c. an accounting change that should be reported by restating the financial statements of all prior periods presented.
d. not an accounting change.

4. On January 1, 2008, Neal Corporation acquired equipment at a cost of $540,000. Neal adopted the sum-of-the-years’-digits method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years, with no residual value. At the beginning of 2011, a decision was made to change to the straight-line method of depreciation for this equipment. The depreciation expense for 2011 would be
a. $28,125.
b. $45,000.
c. $67,500.
d. $108,000.

5. During 2011, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below: Completed-Contract Percentage-of-Completion
2009 $ 475,000 $ 800,000
2010 625,000 950,000
2011 700,000...

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