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E 20-18 Classifying accounting changes Indicate with the appropriate letter the nature of each situation described below: 1. 2. 3. 4. 5. 6. 7.

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E 20-18 Classifying accounting changes Indicate with the appropriate letter the nature of each situation described below: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Type of Change PR PP E EP R Change in principle reported retrospectively Change in principle reported prospectively Change in estimate Change in estimate resulting from a change in principle Change in reporting entity Not an accounting change Change from declining balance depreciation to straight-line. Change in the estimated useful life of office equipment. Technological advance that renders worthless a patent with an unamortized cost of $45,000. Change from determining lower of cost or net realizable value (LCNRV) for the inventories by the individual item approach to the aggregate approach. Change from LIFO inventory costing to the weighted-average inventory costing. Settling a lawsuit for less than the amount accrued previously as a loss contingency. Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years. Change by a retail store from reporting warranty expense on a pay-as-you-go basis to estimating the expense in the period of sale. A shift of certain manufacturing overhead costs to inventory that previously were expensed as incurred to more accurately measure cost of goods sold. (Either method is generally acceptable.) Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.

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