1)In 2016, internal auditors discovered that Fay, Inc., had debited an expense account for the $1,200,000 cost of a machine purchased on January 1, 2013. The machine's useful life was expected to be 6 years with no residual value. Straight-line depreciation is used by Fay. The journal entry to correct the error will include a credit to accumulated depreciation of:

$200,000.

$400,000.

$600,000.

$1,200,000.

2)La Casita Restaurants changed from the FIFO method of inventory costing to the weighted average method during 2016. When reported in the 2016 comparative financial statements, the 2015 inventory amount will be:

Unaffected.

Increased or decreased, depending on how prices changed.

Decreased.

Increased.

3)Retrospective restatement usually is not used for a:

Change in accounting estimate.

Change in entity.

Change in accounting principle.

Correction of error.

4)A company failed to report the $780,000 additional liability for its underfunded pension plan. Its tax rate is 30%. As result of this error, retained earnings would be:

Overstated by $234,000.

Overstated by $780,000.

Overstated by $546,000.

Unaffected.

5)A company failed to record unrealized gains of $20 million on its available for sale security investments. Its tax rate is 30%. As a result of this error, comprehensive income would be:

Unaffected.

Understated by $6 million.

Understated by $20 million.

Understated by $14 million.