1. A change that occurs as the result of new information or as additional experience is acquired is a:
A.Change in accounting principle.
B.Change in accounting estimate.
C.Change in reporting entity.
D.Correction of an error.


2. All of the following are examples of a change in accounting principle except a change from:
A.FIFO to LIFO inventory pricing.
B.Double-declining depreciation to straight-line depreciation.
C.The completed-contract to percentage-of-completion method of accounting for construction contracts.
D.Expensing certain expenditures that were immaterial to deferring and amortizing them because they have become material.


3. A switch from the cash basis of accounting to the accrual basis is considered a:
A.Change in accounting principle.
B.Change in accounting estimate.
C.Change in reporting entity.
D.Correction of an error.


4. Changes in accounting principle are generally accounted for:
A.Retroactively.
B.Prospectively.
C.Currently.
D.Consistently.


5. The cumulative effect of a change in accounting principle is reported:
A.On the income statement as an extraordinary item.
B.On the income statement as part of discontinued operations.
C.On the income statement between discontinued operations and extraordinary items.
D.On the statement as retained earnings as an opening adjustment.


6. All of the following situations require the restatement of prior period financial statements except a change:
A.In the method of accounting for long-term construction contracts.
B.To the LIFO inventory method from another method.
C.To or from the full-cost method of accounting in resource industries.
D.All of the options require restatement.


7. The cumulative effect of a change in the method of accounting for long-term construction contracts is reported:
A.As an extraordinary item.
B.Between extraordinary items and net income on the income statement.
C.As an adjustment to only the current year's beginning retained earnings.
D.As an adjustment of beginning retained earnings of the earliest year presented.


8. The cumulative effect of an accounting change is not calculated for a change:
A.When the change was voluntarily made by management.
B.To the percentage-of-completion method from the completed-contract method.
C.When the effect of the change cannot be determined
D.All of the options require calculation of the cumulative effect of the change.


9. Changes in estimates must be accounted for:
A.Consistently.
B.Currently.
C.Prospectively.
D.Retroactively.


10. Which of the following statements related to changes in estimates is not correct?
A.Financial statements of prior periods are not restated.
B.Opening balances are not adjusted for the change.
C.Pro forma amounts for prior periods are reported.
D.These changes are viewed as normal recurring corrections and adjustments.


11. A change in reporting entity is accounted for:
A.Prospectively.
B.Currently.
C.Retroactively.
D.Consistently.


12. All of the following are examples of accounting errors except:
A.A change from an unacceptable accounting principle to an acceptable accounting principle.
B.A change in estimate that occurs due to a clearly unrealistic original estimate.
C.Misuse of facts.
D.All of the options are accounting errors.


13. Corrections of errors must be accounted for:
A.Currently.
B.By showing pro forma data.
C.Retroactively.
D.Prospectively.


14. Which of the following is not a reason why companies prefer certain accounting methods?
A.Bonus payments.
B.Asset structure.
C.Political costs.
D.Smooth earnings.


15. All of the following involve counterbalancing errors except:
A.Failure to record prepaid expenses.
B.Failure to record depreciation.
C.Understatement of ending inventory.
D.Overstatement of purchases.



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