Please answer all 3 parts of this questions for PART A, B, C, and D. Please show ALL calculations for each answer provided not just the final answer!!!!! Make sure to explain numbers that are not already given in problem.

Answer the questions for each of the following independent situations on Accounting Changes and Errors.

A. During 2020, Schmidt Company increased its investment in Hoopman Company from a 25% interest, purchased in 2018 to 80%. Schmidt changed its accounting from the equity method to the consolidation method.

1. Provide the type of accounting change or identify the error for this situation.
2. Provide the type of reporting approach for the adjustment for this situation.
3. Briefly describe, how you handle this situation in Schmidt’s Consolidated Financial Statements.

B. Berk Company purchased a machine on January 1, 2019 for $70,000. The machine has an estimated useful life of 5 years with a salvage value of $10,000. It is being depreciated using the straight-line method. On January 1, 2021, Berk reevaluated the machine's useful life and now believes it will continue for another 5 years (for a total of 7 years) and have a salvage value of $5,000 at the end of its useful life.  

1. Provide the type of accounting change or identify the error for this situation.
2. Provide the type of reporting approach for the adjustment for this situation.
3. Prepare the adjusting entry to record depreciation at December 31, 2021.

C. Trask Company’s bookkeeper did not accrue salaries payable at the end of 2019 in the amount of $18,000. This mistake was discovered in January after the year-end closing but before the bi-weekly payroll was paid.

1. Provide the type of accounting change or identify the error for this situation.
2. Provide the type of reporting approach for the adjustment for this situation.
3. Prepare the correcting journal entry. Ignore taxes.

D. Pam Erickson Construction Company changed from the completed-contract method to the percentage-of-completion method of accounting for long term construction contracts during 2020 for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. The pretax income under the two methods was as follows:

Percentage- Completed

Year of-Completion Contract

Prior to 2020 $850,000   $650,000

              2020    720,000   500,000

1. Provide the type of accounting change or identify the error for this situation.
2. Provide the type of reporting approach for the adjustment for this situation.
3. Determine the amount of the effect this change would have on the opening balance of retained earnings in the 2020 financial. Assume a tax rate of 20%.

Answer rating: 100% (QA)

A Question No 01For the Year 2018 and 2019 Schmidt Company used the Equity method for reporting the Stock purchased in Hoopman CompanyThe equity method is that the standard technique used when one com... View the full answer