The correction of a mathematical error in the calculation of prior years' depreciation should be: Multiple Choice Recorded as a prior-period adjustment. Corrected with an adjustment to the current period's depreciation expense. Recorded as a change in accounting principle. Recorded as a change in accounting estimate.
Added by Danielle O.
Close
Step 1
Step 1: A mathematical error in the calculation of prior years' depreciation is a mistake that should be corrected. Show more…
Show all steps
Your feedback will help us improve your experience
Akash M and 67 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Akash M.
Roundtree Manufacturing Co. is preparing its year-end financial statements and is considering the accounting for the following items: 1. The vice president of sales has indicated that one product line has lost its customer appeal and will be phased out over the next 3 years. Therefore, a decision has been made to lower the estimated lives of related production equipment from 5 years to 3 years. 2. The Hightone Building was converted from a sales office to offices for the Accounting Department at the beginning of this year. Therefore, the expense related to this building will now appear as an administrative expense rather than a selling expense on the current year's income statement. 3. Estimating the lives of new products in the Leisure Products Division has become very difficult because of the highly competitive conditions in this market. Therefore, the practice of deferring and amortizing preproduction costs has been abandoned in favor of expensing such costs as they are incurred. Identify and explain whether each of the above items is a change in principle, a change in estimate, or an error.
Madhur L.
Mega Jaya Berhad has made several accounting changes to improve the matching of expenses with revenue. The accounting period for the company ends on December 31. The accounting records for the year 2018 have not been adjusted or closed. Among the changes are the following: A) A factory, which has been purchased at a cost of $150,000 (estimated useful life 10 years, residual value $18,000), has been depreciated using the sum-of-the-year-digit method (SYD). Early this year (which is the eighth year according to the equipment's useful life), the company has decided to change to the straight-line method, with no change in residual value or estimated useful life. B) A patent that has been acquired at a cost of $185,000 is being amortized over its legal life of 20 years. At the beginning of 2015 (which is the sixth year according to the patent's legal life), taking into consideration the current economic scenario, the company has decided that the economic benefits expected from the use of the patent would not last longer than 13 years from the date of acquisition of the patent. C) A machine with a ten-year life, which was purchased on January 1, 2017, for $590,200, has not been depreciated. The expected salvage value is $15,200, and it was decided by the board of directors that all items of Property, Plant, and Equipment should be depreciated using the straight-line method. 1-List out the different types of accounting changes and the related accounting treatment as provided in MFRS 108 Accounting Policies, Changes in Accounting Estimates, and Errors? 2-For each of the above situations, identify the type of accounting change that was involved and clearly explain how it should be accounted for in accordance with MFRS 108 Accounting Policies, Changes in Accounting Estimates, and Errors? 3-Prepare the appropriate journal entries to record the change and the required adjustment entries at the end of 2015 for each of the above scenarios. Show all computations and disregard income tax considerations. If no journal entry is required in a particular scenario, provide your explanation.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD