Question 46
According to the FASB conceptual framework, which of the following attributes would not be used to
measure inventory?
measure inventory?
Question 47
Lore Co. changed from the cash basis of accounting to the accrual basis of accounting during 1994. The
cumulative effect of this change should be reported in Lore's 1994 financial statements as a:
cumulative effect of this change should be reported in Lore's 1994 financial statements as a:
Question 48
In single period statements, which of the following should not be reflected as an adjustment to the
opening balance of retained earnings?
opening balance of retained earnings?
Question 49
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with
Quo's president and outside accountants, made changes in accounting policies, corrected several errors
dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment
required for these transactions. These treatments are:
. Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the
accounting change or error correction in the 1993 financial statements, and do not restate the 1992
financial statements.
. Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust
1 992 beginning retained earnings if the error or change affects a period prior to 1992.
. Prospective approach - Report 1993 and future financial statements on the new basis but do not restate
1 992 financial statements.
Item to Be Answered
Quo changed from FIFO to average cost to account for its raw materials and work in process inventories.
List B (Select one)
Quo's president and outside accountants, made changes in accounting policies, corrected several errors
dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment
required for these transactions. These treatments are:
. Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the
accounting change or error correction in the 1993 financial statements, and do not restate the 1992
financial statements.
. Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust
1 992 beginning retained earnings if the error or change affects a period prior to 1992.
. Prospective approach - Report 1993 and future financial statements on the new basis but do not restate
1 992 financial statements.
Item to Be Answered
Quo changed from FIFO to average cost to account for its raw materials and work in process inventories.
List B (Select one)
Question 50
Goddard has used the FIFO method of inventory valuation since it began operations in 1987. Goddard
decided to change to the weighted-average method for determining inventory costs at the beginning of
1 990. The following schedule shows year-end inventory balances under the FIFO and weighted-average
methods: What amount, before income taxes, should be reported in the 1990 retained earnings statement
as the cumulative effect of the change in accounting principle?
decided to change to the weighted-average method for determining inventory costs at the beginning of
1 990. The following schedule shows year-end inventory balances under the FIFO and weighted-average
methods: What amount, before income taxes, should be reported in the 1990 retained earnings statement
as the cumulative effect of the change in accounting principle?
