1) On December 31, 2021 Apple Company changed its method of accounting for

inventory from weighted average cost method to the FIFO method. This change

caused the 2021 beginning inventory to increase by $800,000. The cumulative effect of

this accounting change to be reported for the year ended December 31, 2021,

assuming a 30% tax rate,

is ________

2) Equipment was purchased at the beginning of 2019 for $900,000. At the time of its

purchase, the equipment was estimated to have a useful life of five years and a

salvage value of $100,000. The equipment was depreciated using the straight-line

method of depreciation through 2021. At the beginning of 2022, the estimate of useful

life was revised to a total life of seven years and the expected salvage value was

changed to $42,500. The amount to be recorded for depreciation for 2022 is _______

3) XYZ Company purchased a machine on January 1, 2018, for $900,000. At the date

of acquisition, the machine had an estimated useful life of six years with no salvage.

The machine is being depreciated on a straight-line basis. On January 1, 2022, XYZ

determined that the machine had an estimated useful life of seven years from the date

of acquisition with no salvage. An accounting change was made in 2022 to reflect this

additional information.

What is the amount of depreciation expense for the year ended December 31,

2022?

4) Green Inc. is a calendar-year corporation. Its financial statements for the years

ended 12/31/20 and 12/31/21 contained the following errors:

2020 2021

Ending inventory $40,000 understatement $60,000

overstatement

Depreciation expense 15,000 overstatement 40,000

overstatement

Assume that the 2020 errors were not corrected and that no errors occurred in 2019.

By what amount will 2020 income before income taxes be overstated or understated?

5) Accrued salaries payable of $108,000 were not recorded at December 31, 2020.

Office supplies on hand of $60,000 at December 31, 2021 were erroneously treated as

expense instead of supplies inventory. Neither of these errors was discovered nor

corrected. The effect of these two errors would cause retained earnings at December

31, 2021 to be in error by what amount

6) Orange Co. began operations on January 1, 2020. Financial statements for 2020

and 2021 contained the following errors:

Dec. 31, 2020 Dec. 31, 2021

Ending inventory $198,000 overstated $219,000 understated

Depreciation expense 126,000 overstated

In addition, on December 31, 2021 fully depreciated equipment was sold for $44,000,

but the sale was not recorded until 2022. No corrections have been made for any of

the errors. Ignore income tax considerations.

The total effect of the errors on the balance of Orange's retained earnings at

December 31, 2021 is understated by _______

7) Blue Sky Co. purchased machinery that cost $2,000,000 on January 1, 2018. The

entire cost was recorded as an expense. The machinery has a nine-year life and a

$100,000 residual value. The error was discovered on December 20, 2021. Ignore

income tax considerations.

Blue Sky's income statement for the year ended December 31, 2021, should show

depreciation expense of _______

8) ABC Company purchased equipment that cost $2,000,000 on January 1, 2019. The

entire cost was recorded as an expense. The equipment had a ten-year life and a

$100,000 residual value. ABC uses the straight-line method to account for

depreciation expense. The error was discovered on December 10, 2022. ABC is

subject to a 30% tax rate.

What is the adjustment to retained earnings at January 1, 2022?