Beruflich Dokumente
Kultur Dokumente
Intermediate Accounting
12th Edition
Kieso, Weygandt, and Warfield
Prepared by Coby Harmon, University of California, Santa Barbara
as modified by Teresa Gordon, University of Idaho
Learning Objectives
Error Analysis
Balance sheet
errors
Income statement
errors
Balance sheet and
income statement
effects
Comprehensive
example
Preparation of
statements with
error corrections
Change in accounting
principle
A
Change in accounting
principle
A
Reporting a change in
principle
$ XXX
$ XX
$ XX
$ XXX
- XX
$ XXX
9
10
Retrospective
Retrospective Change
Change Example
Example
Example (Retrospective Change) Buildmore
Construction Company used the completed contract
method to account for long-term construction
contracts for financial accounting and tax purposes in
2006, its first year of operations. In 2008, the
company decided to change to the percentage-ofcompletion method for financial accounting purposes.
Income before long-term contracts and taxes in 2006,
2007, and 2008 was $50,000, $80,000 and $100,000.
The tax rate is 40% and the company will continue to
use the completed contract method for tax purposes.
12
Retrospective
Retrospective Change
Change Example
Example
Example Income from Long-Term Contracts
13
Retrospective
Retrospective Change
Change Example
Example
Example Comparative Income Statements
2008
Restated
2007
Previous
2007
$ 100,000
$ 80,000
$ 80,000
60,000
40,000
25,000
160,000
120,000
105,000
64,000
48,000
42,000
96,000
$ 72,000
$ 63,000
14
LO 3 Understand how to account for retrospective accounting changes.
Retrospective
Retrospective Change
Change Example
Example
Example Retained Earnings Statement
15
LO 3 Understand how to account for retrospective accounting changes.
Changes in
accounting estimates
Current and prospective method
16
Many
Many amounts
amounts on
on FS
FS involve
involve
estimates,
estimates, including:
including:
1. Uncollectible receivables.
2. Inventory obsolescence.
3. Useful lives and salvage values of assets.
4. Periods benefited by deferred costs.
5. Liabilities for warranty costs and income taxes.
6. Recoverable mineral reserves.
7. Change in depreciation methods.
17
Change in Estimate
Estimates
Change in Estimate
Sometimes
19
Changes in Accounting
Estimates
Are
Two
numeric examples
Depreciation expense
Depletion expense
20
Depreciation Example
$240,000
$40,000
5 years
21
Solution
$240,000 - 40,000
- 40,000 =
$160,000
Carrying Value
new
estimate
160,000 -10,000
6
=
8-2
$ 25,000
22
Alternate treatment
If
$28,750
We
Alternate treatment
240,000 -10,000
8
$28,750
2012
Correcting JE:
Accd Depr
22,500
Depr Exp
22,500
Record 2012 depreciation:
Depr Exp
28,750
Accd Depr
28,750
24
of property
Cost to restore property
Value after restoration
Recoverable resources
First year production
Sold for
Statutory depletion rate
for tax purposes = 10%
$9,000,000
$1,200,000*
$1,000,000
4,000,000 tons
150,000 tons
$30 per ton
* Present value (asset
retirement obligation
measured in accordance
with SFAS No. 143)
25
=
$2.30
per ton
26
Statutory Depletion
Disclosure of Changes in
Estimate
Not
UNLESS
material
31
Reporting the
Correction of an Error
33
Restatement Example
SFAS
34
35
Accounting
Accounting Changes
Changes
A.
B.
C.
D.
36
Accounting
Accounting Changes
Changes
A.
B.
C.
D.
37