I have a timed essay-type question I will need help on. I will need to setup an agreed upon time to send you the question and you'll have 2.5 hours to respond. If you're interested, please let me know. Here is a sample question the instructor gave us:

Essay

This essay focuses onthe accounting treatment of equipment and will be gradedbased on:

1. Did you answer the question.

2. Did you cover all the topics that apply.

3. Did you cover the alternatives and support your suggestions

4 The essaywill not be accepted after the due date.

Sample Essay

The company controller has been valuing the inventory using LIFO for the past two years.At the beginning of the 3^rdyear the manager, who took a beginning accounting class,tells the controller this is an error and that the method that should be used for valuing inventory is FIFO.The manager wants the controller to change to FIFO inventory valuation from this year forward.

What should the controller tell the manager about

1. the type of change

2. the accounting issues

3. what must be done to the financial statements .

Sample Answer

1. Although it would be treated the same, this is not an error but a change in accounting principle.

2. A change in accounting principle must be treated retroactively if possible. If it can be done, prior year financial statements must be restated reflecting the inventory valued at FIFO and an adjustment to cost of goods sold on the income statement.

3. The current yearfinancialswould show inventory valued at FIFO and the balance sheet would show an adjustment to beginning retained earnings for the effects of prior years.There would also be a footnote disclosure explaining the change and the effects on thefinancials.If prices are rising this should improve net income, but increase the value of inventory.If prices are dropping it will have a negative impact on income and reduce inventory.

In addition I would explain all this to the manager before I did anything so they know the full effect of the change.