Learning Materials
Features
Discover
Chapter 22: 22-5IFRS (page 1328)
Discuss how a change in accounting policy is handled when it is impracticable to determine previous amounts
Accounting policies are the rules and regulations which are followed to maintain the financial accounts, and the previous amounts should be used.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Which of the following is true regarding whether IFRS specifically addresses the accounting and reporting for effects of changes in accounting policies?
Direct effects Indirect effects
(a) Yes Yes
(b) No No
(c) No Yes
(d) Yes No
Oliver Corporation has owned stock of Conrad Corporation since 2014. At December 31, 2017, its balances related to this investment were:
Equity Investments \(185,000
Fair Value Adjustment (AFS) 34,000 Dr.
Accumulated Unrealized Holding Gain or Loss—Income (recorded in Retained Earnings) 34,000 Cr.
On January 1, 2018, Oliver purchased additional stock of Conrad Company for \)475,000 and now has significant influence over Conrad. If the equity method had been used in 2014–2017, Oliver’s share of income would have been $33,000 greater than dividends received. Prepare Oliver’s journal entries to record the purchase of the investment and the change to the equity method.
Tedesco Company changed depreciation methods in 2017 from double-declining-balance to straight-line. Depreciation prior to 2017 under double-declining-balance was \(90,000, whereas straight-line depreciation prior to 2017 would have been \)50,000. Tedesco’s depreciable assets had a cost of \(250,000 with a \)40,000 salvage value, and an 8-year remaining useful life at the beginning of 2017. Prepare the 2017 journal entries, if any, related to Tedesco’s depreciable assets
On January 3, 2016, Martin Company purchased for \(500,000 cash a 10% interest in Renner Corp. On that date, the net assets of Renner had a book value of \)3,700,000. The excess of cost over the underlying equity in net assets is attributable to undervalued depreciable assets having a remaining life of 10 years from the date of Martin’s purchase.
The fair value of Martin’s investment in Renner securities is as follows: December 31, 2016, \(560,000, and December 31, 2017, \)515,000. On January 2, 2018, Martin purchased an additional 30% of Renner’s stock for \(1,545,000 cash when the book value of Renner’s net assets was \)4,150,000. The excess was attributable to depreciable assets having a remaining life of 8 years. During 2016, 2017, and 2018, the following occurred.
Renner Dividends Paid by
Net Income Renner to Martin
2016 \(350,000 \)15,000
2017 450,000 20,000
2018 550,000 70,000
Instructions On the books of Martin Company,
prepare all journal entries in 2016, 2017, and 2018 that relate to its investment in Renner Corp., reflecting the data above and a change from the fair value method to the equity method.
As part of the year-end accounting process and review of operating policies, Cullen Co. is considering a change in the accounting for its equipment from the straight-line method to an accelerated method. Your supervisor wonders how the company will report this change in accounting. It has been a few years since he took intermediate accounting, and he cannot remember whether this change would be treated in a retrospective or prospective manner. Your supervisor wants you to research the authoritative guidance on a change in accounting policy related to depreciation methods.
Instructions
(a) What are the accounting and reporting guidelines for a change in accounting policy related to depreciation methods?
(b) What are the conditions that justify a change in depreciation method, as contemplated by Cullen Co.?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App