QUESTION 17-16 Multiple choice (ATCPA Adaptegy 1. How should tho effect of a change in accounting eatin be accounted for? y restating ta reported in prior periods - By seatating me amount PH Pena As a prior period ‘adjustment of retuined earnings i Heer Rt of change and future periods if the chan, affects both Which is characteristic of a change in accounting estima, ap rp s .d not be disclosed need the financial statements of prior pergg a. It usually through the restatement of the b. It.does not, c. It should be reported ja] statements . a. enanthes necessary the reporting of proforma amount 3 ein the periods benefited by a deferred cost because : sadtdonal tnformation has been obtained is An accounting change reported in the period of chan : and future periods if the change affects both = b, An accounting change that should be reported by restating the financial statements of all prior periods presented ¢. A correction of an error d. Not an accounting change ‘A change in the residual value of an asset arising because additional information has been obtained is ‘a. An accounting change reported in the period of change and future periods if the change affects both b. An accounting change that should be teported by restating the financial statements of all prior periods presented c. A correction of an error d. Not an accounting change a Why is retrospective treatment of change in accounting estimate prohibited? a. Achange in accounting estimate is a normal recurring correction or adjustment, b. The retrospective treatment is not allowed. c. Retrospective treatment of a change in accounting estimate is required by IFRS. d. TFRS is silent on the issue. s 200 Brcanscannerange in accounting policy inseparable from a change we cyunting estimate should be renovted - a BY restating the financial statements of all prior periods. tag a correction of an error. ¢. Inthe parid of change and future periods if the change 4 _ which should be reported when an entity changed from Which line depreciation to double dedinage ‘Cumulative effect of change in accounting poli t Qulorma eect of reonctive application & a. © & ig acco ts both. : Aga disclosure after income from continuing operations. o Prior period error ‘4n accounting change that should be reported currently and prospectively . Whichisnota justification for a change in depreciation method? 4, Achange in the estimated useful life b. Achange in the pattern of the estimated future benefit "fo conform with the depreciation method prevalent in a particular industry 4. Achange in the estimated future benefit, G. Which of the following should be reported when an entity MNanged the expected service life of an asset? a, Cumulative effect of change in accounting policy b, Proforma effect of retroactive application c. Prior period error 4. An accounting change that should be reported in the period of change and future periods 2 «10, Which is the best explanation why accounting changes are classified into accounting policy and accounting estimate? a. The materiality of the change b. Each change involves different method of recognition in the financial statements ¢, The fact that some treatments are considered GAAP d. The need to provide a favorable profit picture ANSWER 17-15 Hid. 0 8.7 a Boa tod 94 Xb 4a 6. ¢ 8 ¢ 10. b 201 CamScannerQUESTION 17-16 Multiple choice Tie 41. Which is the first step witht? ase hlorerthy olay when selecting accounting polic er a. Apply a standard from pers if it = ly rt to the transaction te in IFRS dealing with simi b. Apply the require * and related issue apility of a definition, e. Consider the ab fana messuremen concepts int recognition : Conceptual Framewor + pron d. Consider # ye most ret standard setting accounting 2, In the absence of A ON at i ifically to a transacty ote special eloping and applying © ouncements of othe, standard that applic, the most authoritative counting policy? ce in the standard op . 4 guidan a The et ing ‘nth similar and related issue, interpretation mnition criteria and measurement ind expense in the Conceptual ', income a work. S c. Nat recent pronouncement of other standard-setting body. 5 d. ‘eoounting literature and accepted industry practice, 5 3, Achange in accounting policy shall be made when I. Required by law. I. Required by an accounting standard or an interpretation of the standard. IIL The change will result in more relevant or reliable information about the financial position, financial performance and cash flows of the entity. a. Land I only b. Hand Iif only ec. Tand IT only d. I Wand 202 CamScannetB 4, Why is an entit; i . : & policy? Y Permitted to change an accounting a. The change would all 44 favorable profit picture, °° CMY to present a more b, The change wou c. The change is made by the a. The change is mate 2 fH2 internal auditor, CPA. A change in accounting poli i i ¢ Policy requir. a, Current period adjustment b. Prospective adjustment ©. Retrospective adjustment d. Current and prospective adjustment 2 a6. A change in accounting policy requires that the cumulative effect of the change for prior periods shor be reported as an adjustment to a. Beginning retained earnin, presented. b. Net income occurred. c. Comprehensive income for presented. 4. Shareholders’ equity for the period in which the change occurred. igs for the earliest period for the period in which the change the earliest period ° a » Which of the following is accounted for as a change in accounting policy? a. Achange in the estimated useful life of property, plant and equipment a b. Achange from cash basis to accrual basis of accounting c. A change from expensing immaterial expenditures to deferring and amortizing thém when material 4. Achange in inventory valuation from FIFO to average method 203 CamScanner> 8. A change in accounti o_ ing policy a, The initial adoption at revalued amount. b. ‘The change from cost ™ measuring property) plan c, A change to 2 new 8° new standard. ‘A change from © method of depreciation e fol yolicy? d. 9. Which of th accounting P' jg made in the ofan accounting ounting PO ne method of depreci owing should b sncuides al of the folloyig iy policy tO carry ayy, a ie] to revaluation mode] i ia mt t and equipment. jiey a6 required by a ation 02 differen, treated as change in method of calculating th. a, A change for doubtful accounts T to fair value model in provision b. A change from measuring im c. ‘an entity engaging in time needs on d. All of these acoounting es change is treated as a. Change in ace’ disclosure . Correction of an error | Change in accounting es! disclosure ANSWER 17-16 Pepe erent Ee Seong aoroae 204 (qualify as change in j.10. When it is difficult to distinguish timate and a change in ost model vestment proper onstruct jecounting policy to ty ‘ion contract for the srl with this ‘ecounting policy h between a change in accounting policy, the ounting estimate with appropriate . Change in accounting policy timate with no appropriate CamScannet* QuESTION 17-17 Multiple choice (IFRS) An entity that changed an accounti i . should ‘ing policy voluntarily . Inform shareholders prior to taki ; a: farm shargheliee pio to ting the decison ¢, Treat the effect of the change as a component of OCI g. Treat the change prospectively. : 2, Which statement best describes prospective application? a, Recognizing a change in accounting poli euurent and fubire periods affected OF Ihe change.” b, Correcting the financial statem if a prior peri devon had aver occured ce Price Berto. ‘Applying a new accounting poli i C. 1 ing policy to ti occurring after the date the policy is changed, d. Applying a new accounting policy to transactions as if that policy had always been applied. Bh ° a 3,-Which describes applying’a new accounting policy to transactions as if that policy had always been applied? a. Retrospective application b, Retrospective restatement ¢. Prospective application d. Prospective restatement 5 4, This means correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred. a. Retrospective application b. Retrospective restatement c. Prospective application d. Pfospective restatement 5 6, If it is impracticable to determine the cumulative effect of an accounting change to any of the prior periods, the accounting change should be accounted for a. As a prior period error b. On a prospective basis. c, Asa cumulative effect change in the income statement. d. As an adjustment of retained earnings. ANSWER 17-17 Lb 20¢ 8. a 4. b 5. b 205 BconscanerQUESTION 17-18 Multiple choice (AICPA Adapted) p 1. Prior period errors a, Do not include the effect of b. of acounting poly presentation of PriOr periag comparative financial TP, c. Do not require funthet ent of the opening balance of mnistake in the applicaig, C9, An example of a correction of an error in previously issyeg financial statements is @ change : From FIFO method of inventory valuation to the average a. b. ae a. ce life of property, plant and equipment, dn the eh basis to accrual basis of account, @. In the tax assessment ‘elated to a prior period, is to accrual basis tity that changed from cash basis be : A ting ‘during the current year should report a. Prior period adjustment resulting from the correction of an error. : b, Prior period adjustment resulting from the change-n accounting policy. ; c. Component of income from continuing operations. 4. Component of income from discontinued operations, > «4A change from an accounting principle that is not generally accepted to one that is generally accepted should be reported as a. Component of income from continuing operations b. Component of discontinued operations c. An adjustment of retained earnings ‘d. Component of other comprehensive income ANSWER 17-18 1d Ba ae 4 CamScannerquestion 17-19 Multiple choice (AICPA Ac dapeed) change 3 reporting entity is actually a change in 4 i" gccounting policy & ‘Seounting estimate b Accounting method §, Accounting concept ay Which is not change in reporting entity? 4, Changing the entities in combined financial statements Disposition of a subsidiary or other business unit ¢. Presenting consolidated statements in place of the * separate financial statements of individual entities 4. Changing specific subsidiaries that constitute the group for which consolidated financial statements are presented. 4, What is the proper accounting treatment for a change in reporting entity? a. Restatement of financial statements of all prior periods presented b. Restatement of current period financial statements ¢. Note disclosure and supplementary schedule d, Adjustment of retained earnings and note disclosure 5 4 An entity has included in the consolidated financial statements this year a subsidiary acquired several years ago that was appropriately excluded from consolidation last year. How should this change be reported? a, An accounting change that should be reported prospectively b. An accounting change that should be reported retrospectively c. A correction of an error d. Neither an accounting change nor a correction of an error ANSWER 17-19 La 3a ab 4b BeonscannerQUESTION 17-20 Multiple eboice ORS) ‘i red that . ear, an entity ¢\5oetemente for itt pl. During the current y 1a orci in the fin’ mere tae tty tated. How show © entity inventory reported ii prior year was unders ¥ account for this understatemen’* : ey in the prior year, i janing inventory e b Adjust the be ean statements with correcteg bale i resented. balances i all Per tance ‘in retained earnings a c. Adjust the endit : d, current yorrey because the error will self-correct . Mal the entity discovered th, 2 On Mareh 15, 2: gong, was overstated. The 2093 depreciation 2*P uuthorized for issue on Apr) $5023. What must the entity do? * “Correct the 2022 financial statements before issuing n for 2023. ‘tion expense reported for 2029 figures of the 2023 financial a them. ee b. Reduce depreciation c. Restate the depreci jin the comparative statements. d. Do nothing. . On April 1, 2023, the entity discovered that depreciati open ty Grated. ‘The 2022 financial cc” expense for 2022 was overstat statements were ‘authorized for issue on March 15, 2023, What must the entity do? a, Reissue the 2022 financial statements with the correct depreciation expense. b. Reduce depreciation for 2023. c. Restate the depreciation expense reported for 2022 in the comparative figures of the 2023 financial statements. 4, Do'nothing, ANSWER 17-20 lb ‘ 2a 3. Brcanscanner