Affect of accounting change on prior periods

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1. Problem - A company acquired machinery at a certain cost. The company adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of a certain number of years, with no residual value. A decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense should be what amount?

2. Problem - 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 are provided. Assuming a certain income tax rate for all years, the affect of this accounting change on prior periods should be reported by a credit of what amount and on what report?

3. Problem - A company purchased machinery. The entire cost was recorded as an expense. The machinery has an estimated useful life of a certain number of years and a certain salvage value. The company uses the straight-line method to account for depreciation expense. An error was discovered. Ignore income tax considerations. The company's income statement for the year ended December 31, should show the cumulative effect of this error in the amount of what?

Reference no: EM13487499

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