EXERCISES

E$22-1$ Identification and Effects of Changes and Errors The following are independent events:

LO $22\mathrm{.}1$ a$.$ Changed from the LIFO to the FIFO inventory cost flow assumption.

b$.$ Reduced remaining service life of machinery from $10$ to $8$ years.

c$.$ Changed from an accelerated method to the straight$-$line method of depreciating assets.

d$.$ Wrote$-$down inventories because of obsolescence.

e$.$ Received damages won in a court suit instigated $5$ years ago.

f$.$ Discovered that costs were recorded as an expense in a previous period but should have been recorded as an item of property, plant, and equipment.

g$.$ Wrote down property, plant, and equipment because of closure of inefficient plants.

h$.$ Changed from the successful$-$efforts method to the full$-$cost accounting method for oil exploration costs.

Required:

Indicate what type of accounting change or error, if any, is represented by each of the preceding items and the method of accounting $($retrospective adjustment, prospective, or prior period adjustment$)$ for the item in the financial statements of the current year.

Next Level Indicate the effect on the financial statements of the item $($e$.$g$.,$ which accounts or line items are affected and is the effect an increase or a decrease$).$