Question
14. On January 2, 2018, Bluth Company began using straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance
14. On January 2, 2018, Bluth Company began using straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance depreciation for these assets. As of January 2, 2018, the amount of the change in accumulated depreciation is $40,000. The appropriate tax rate is 40%.
The separately reported change in 2018 earnings is
A. an increase of $24,000.
B. an increase of $40,000.
C. a decrease of $40,000.
15. Melon Company granted 180,000 restricted stock awards of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. Melon's common shares have a market price of $10 per share on January 1, 2017, the grant date, and at December 31, 2018, averaging $10 throughout the year. When calculating diluted EPS at December 31, 2018, the net increase in the denominator of the EPS fraction will be _______ shares.
A. 180,000
B. 0
C. 120,000
D. 60,000
16. Under its executive stock option plan, R Corporation granted options on January 1, 2018 that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were anticipated; however, unexpected turnover during 2019 caused the forfeiture of 5% of the stock options. Ignoring taxes, what's the effect on earnings in 2020?
A. $20 million
B. $18 million
C. $19 million
D. $18.5 million
17. Which of the following statements is true regarding correcting errors in previously issued financial statements prepared in accordance with International Financial Reporting Standards (IFRS)?
A. The error can be reported prospectively if it isn't considered practicable to report it retrospectively.
B. The error can be reported in the current period if it isn't considered practicable to report it prospectively.
C. Retrospective application is required with no exception.
D. The error can be reported in the current period if it isn't considered practicable to report it retrospectively.
18. The modified retrospective approach requires
A. a modification of prior years' financial statements.
B. a journal entry to adjust account balances in the beginning of the year of change.
C. both a modification of prior years' financial statements and a journal entry to adjust account balances in the beginning of the year of change.
D. neither a modification of prior years' financial statements nor a journal entry to adjust account balances in the beginning of the year of change.
19. A change that uses the prospective approach is accounted for by
A. reporting pro forma data.
B. retrospective restatement of all prior financial statements in a comparative annual report.
C. implementing it in the current year.
D. giving current recognition of the past effect of the change.
20. When an accounting change is reported under the retrospective approach, account balances in the general ledger are
A. adjusted to what they would have been had the new method been used in previous years.
B. adjusted net of the tax effect.
C. closed out and then updated.
D. not adjusted.
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