1. On January 1, 2017, Nathan, Inc. purchased a machine for $56,000. Eight-year, straight-line depreciation with no salvage value was used through December 31, 2018. On January 1, 2019, it was estimated that the total useful life of the machine from acquisition date was ten years. Refer to Exhibit 22-2. what is the amount of the adjusting entry that should be made on January 1, 2019?

a. $3,600

b. $6,000

c. $0

d. $2,400

2. North Company has a fiscal year ending on December 31. Its financial statements for the years ended December 31, 2016 and 2017 contained the following errors:

	2016	2017
Ending inventory	$19,000 understated	$15,000 overstated
Bad debt expense	2,000 overstated	1,000 understate

Assume no correcting entries have been made. Refer to Exhibit 22-6. By how much was North's 2017 net income overstated or understated?

a. $7,000 understated

b. $14,000 overstated

c. $23,000 understated

d. $35,000 overstated

3. If a prior-period error only affects the balance sheet, the company should

a. discuss the error in the notes to the financial statements only

b. discuss the error in the notes to the financial statements and restate the balance sheet from the prior year

c. restate the balance sheet from the prior year if it shows comparative financial statements

d. make a correcting journal entry and restate the balance sheet for the prior year

4. True or False: GAAP allows the use of either the direct or indirect method but prefers the direct method. Companies who use the indirect method must also include a separate schedule reconciling net income to net cash flow provided by operating activities.