ACC 312 FINAL EXAM MC QUESTIONS AND CORRECT
ANSWERS
What is the current practice for accounting for leases? - Answers - To classify the lease
as operating or finance; in both cases, the company will capitalize all leased assets and
liabilities. (look at the five tests in notes)
What type of lease has only a single expense? - Answers - Operating Leases
How to compute the amortization of leased assets. - Answers - Check Chapter 21 -
Operating lease - Practice and Caterpillar lease amortization schedules OR Pgs. 21-13
to 21-24
What is recorded for an operating lease? - Answers - Check Pgs 21-19 to 21-22
What is recorded for a financing lease? - Answers - Check Pgs 21-12 to 21-14
Be able to identify what is or is not a change in accounting principles. - Answers - A
change from one GAAP to another one. Ex: change from LIFO to avg. cost, change
from completed contract to the percentage-of-completion method.
Disclosures when changing accounting principles. - Answers - 1. The nature of and
reason for the change in accounting principle. Must include explanation of why the
change is preferred.
2. The method of applying the change, and:
a. Description of the prior period info. that has been retrospectively adjusted if any.
b. The effect of the change on any affected line item on the income statement, and any
affected per share amount for the current or prior periods (if retrospectively).
c. The cumulative effect of the change on retained earnings or other components of
equity or net assets in the statement of financial positions.
(Located on the bottom of Pg. 22-7)
How are changes in accounting estimates recorded? - Answers - Recorded
prospectively (from this point forward). Companies should not adjust previously reported
results.
General change in reporting entity requirements (to consolidated). - Answers -
Presenting consolidated statements in place of statements of individual companies.
Companies report the change by changing the financial statements of all prior periods
presented.
(See pg. 22-18 for more examples of change)
ANSWERS
What is the current practice for accounting for leases? - Answers - To classify the lease
as operating or finance; in both cases, the company will capitalize all leased assets and
liabilities. (look at the five tests in notes)
What type of lease has only a single expense? - Answers - Operating Leases
How to compute the amortization of leased assets. - Answers - Check Chapter 21 -
Operating lease - Practice and Caterpillar lease amortization schedules OR Pgs. 21-13
to 21-24
What is recorded for an operating lease? - Answers - Check Pgs 21-19 to 21-22
What is recorded for a financing lease? - Answers - Check Pgs 21-12 to 21-14
Be able to identify what is or is not a change in accounting principles. - Answers - A
change from one GAAP to another one. Ex: change from LIFO to avg. cost, change
from completed contract to the percentage-of-completion method.
Disclosures when changing accounting principles. - Answers - 1. The nature of and
reason for the change in accounting principle. Must include explanation of why the
change is preferred.
2. The method of applying the change, and:
a. Description of the prior period info. that has been retrospectively adjusted if any.
b. The effect of the change on any affected line item on the income statement, and any
affected per share amount for the current or prior periods (if retrospectively).
c. The cumulative effect of the change on retained earnings or other components of
equity or net assets in the statement of financial positions.
(Located on the bottom of Pg. 22-7)
How are changes in accounting estimates recorded? - Answers - Recorded
prospectively (from this point forward). Companies should not adjust previously reported
results.
General change in reporting entity requirements (to consolidated). - Answers -
Presenting consolidated statements in place of statements of individual companies.
Companies report the change by changing the financial statements of all prior periods
presented.
(See pg. 22-18 for more examples of change)
