AICPA CPA-Financial Exam - Topic 1 Question 68 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 68
Topic #: 1

On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants, made changes in accounting policies, corrected several errors dating from 1992 and before, and instituted new accounting policies.

Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.

This question represents one of Quo's transactions. List A represents possible clarifications of these transactions as: a change in accounting principle, a change in accounting estimate, a correction of an error in previously presented financial statements, or neither an accounting change nor an accounting error.

Item to Be Answered

As a result of a production breakthrough, Quo determined that manufacturing equipment previously depreciated over 15 years should be depreciated over 20 years.

List A (Select one)

AChange in accounting principal.

BChange in accounting estimate.

CCorrection of an error in previously presented financial statements.

DNeither an accounting change nor an accounting error.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. Change in lives of fixed assets is a change in accounting estimate.

by Eun at Apr 02, 2023, 12:41 AM

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Cary

4 months ago

Nope, not an error, just a smart move on estimates!

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Mica

4 months ago

I’m surprised they can just change the depreciation like that!

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Werner

4 months ago

Wait, are we sure it’s not a change in accounting principle?

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Mitsue

4 months ago

Totally agree, it’s about adjusting future depreciation.

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Glendora

4 months ago

This is definitely a change in accounting estimate.

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Arthur

5 months ago

I feel like this is neither an accounting change nor an error, but I need to double-check how we classify changes in estimates.

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Eden

5 months ago

This seems like a correction of an error, but I guess it’s more about revising estimates based on new information, right?

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Paris

5 months ago

I'm not entirely sure, but I remember something about changes in depreciation methods being classified as changes in accounting principles.

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Soledad

5 months ago

I think this might be a change in accounting estimate since it's about adjusting the useful life of the equipment.

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Isabella

5 months ago

Cloud Spanner is an intriguing choice, but I'm not sure if the time series aspect is its strong suit. I'd want to dig deeper into how well it handles that kind of workload.

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Stephanie

5 months ago

Hmm, this looks like a tricky one. I'll need to carefully calculate the total daily insulin dose and then split it into the appropriate long-acting and short-acting components.

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