AICPA CPA-Financial Exam - Topic 2 Question 94 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 94
Topic #: 2

[All CPA-Financial Questions]

In which of the following situations should a company report a prior-period adjustment?

AA change in the estimated useful lives of fixed assets purchased in prior years.

BThe correction of a mathematical error in the calculation of prior years' depreciation.

CA switch from the straight-line to double-declining balance method of depreciation.

DThe scrapping of an asset prior to the end of its expected useful life.

Show Suggested Answer

Suggested Answer: B

Choice 'B' is correct. Changes in accounting principle are handled 'retrospectively.' Beginning retained earnings of the earliest year presented is adjusted for the cumulative effect of the change and all prior year financial statements are restated.

by Marcos at Aug 08, 2024, 03:15 PM

Limited Time Offer

25%

Off

Get Premium CPA-Financial Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Emilio

3 months ago

C just feels wrong to me, can someone explain?

upvoted 0 times

...

Elke

3 months ago

I agree with B, that’s a clear mistake that needs fixing!

upvoted 0 times

...

Laura

3 months ago

Wait, are we really reporting for a change in useful life? Seems odd.

upvoted 0 times

...

Octavio

4 months ago

A change in depreciation method isn't a prior-period adjustment, right?

upvoted 0 times

...

Malcolm

4 months ago

Definitely B, gotta correct those errors!

upvoted 0 times

...

Rory

4 months ago

I’m confused about option D. Scrapping an asset seems like it could be a prior-period adjustment, but I thought that was more about errors in financial statements.

upvoted 0 times

...

Coletta

4 months ago

I practiced a similar question where we discussed prior-period adjustments, and I feel like B was the right answer there too.

upvoted 0 times

...

Kris

4 months ago

I'm not entirely sure, but I remember something about changes in estimates not requiring prior-period adjustments. So maybe A and C aren't correct?

upvoted 0 times

...

Inocencia

5 months ago

I think a prior-period adjustment is needed for option B, correcting a mathematical error in depreciation. That sounds like something we covered in class.

upvoted 0 times

...

Elly

5 months ago

I'm a bit confused on the difference between a change in estimate and a correction of an error. Can someone clarify that for me? I want to make sure I understand this properly.

upvoted 0 times

...

Kallie

5 months ago

Okay, let me see. I believe a prior-period adjustment is required when there's a correction of an error, not just a change in estimate. So I think the answer is B.

upvoted 0 times

...

Jacquelyne

5 months ago

Hmm, I'm not sure about this one. I'll have to think it through carefully. Maybe I should review my notes on prior-period adjustments again.

upvoted 0 times

...

Cheryl

5 months ago

This question seems straightforward, I think the answer is B - the correction of a mathematical error in the calculation of prior years' depreciation.

upvoted 0 times

...

Jolene

5 months ago

Interesting problem. I'm wondering if the Modified On field might not be set as searchable in the case entity customization. That could definitely cause the exact match to not work as expected.

upvoted 0 times

...

Maricela

5 months ago

Okay, I remember learning about namespaces in Linux. I believe they do provide resource isolation for containers, so I'll go with "Yes" on this one.

upvoted 0 times

...

Stefania

5 months ago

I remember discussing PII in class, but I'm not sure if it includes both PII and plain text name value pairs.

upvoted 0 times

...

Gabriele

10 months ago

Ah, the joys of corporate bookkeeping. Where even the smallest rounding error can send the accountants into a tizzy. At least they'll never run out of ways to keep themselves busy!

upvoted 0 times

Elroy

8 months ago

C) A switch from the straight-line to double-declining balance method of depreciation.

upvoted 0 times

...

Lezlie

8 months ago

B) The correction of a mathematical error in the calculation of prior years' depreciation.

upvoted 0 times

...

Janella

8 months ago

A) A change in the estimated useful lives of fixed assets purchased in prior years.

upvoted 0 times

...

Nichelle

10 months ago

D is tempting, but I think B is the way to go. Scrapping an asset early is more of an operational issue, not a prior-period adjustment. Unless you accidentally bought a dud, that is.

upvoted 0 times

Antonio

9 months ago

A) A change in the estimated useful lives of fixed assets purchased in prior years.

upvoted 0 times

...

Matthew

9 months ago

D is tempting, but I think B is the way to go. Scrapping an asset early is more of an operational issue, not a prior-period adjustment. Unless you accidentally bought a dud, that is.

upvoted 0 times

...

Leonora

9 months ago

B) The correction of a mathematical error in the calculation of prior years' depreciation.

upvoted 0 times

...

Mindy

10 months ago

I'll go with B too. If you messed up the math, you gotta fix it, no matter how embarrassing that might be. At least it's better than fudging the numbers, right?

upvoted 0 times

Shawnda

9 months ago

C) A switch from the straight-line to double-declining balance method of depreciation.

upvoted 0 times

...

Novella

9 months ago

I agree, it's important to correct any errors in the calculations.

upvoted 0 times

...

Vonda

9 months ago

B) The correction of a mathematical error in the calculation of prior years' depreciation.

upvoted 0 times

...

Ena

10 months ago

A) A change in the estimated useful lives of fixed assets purchased in prior years.

upvoted 0 times

...

Bonita

10 months ago

Hmm, I was considering A as well, but I guess B is the better choice here. Adjusting for a mistake in the numbers seems like the right call for a prior-period adjustment.

upvoted 0 times

Bok

9 months ago

User 2: I agree, but I think B is a better option. Correcting a mathematical error makes sense.

upvoted 0 times

...

Rhea

10 months ago

User 1: I think A is a good choice for a prior-period adjustment.

upvoted 0 times

...

Laurel

10 months ago

But what about the switch from straight-line to double-declining balance method of depreciation? Shouldn't that also be reported as a prior-period adjustment?

upvoted 0 times

...

Roxane

10 months ago

I agree with Cyndy. It's important to reflect the correct information in the financial statements.

upvoted 0 times

...

Cyndy

10 months ago

I think a company should report a prior-period adjustment when there's a change in the estimated useful lives of fixed assets purchased in prior years.

upvoted 0 times

...

Izetta

11 months ago

I think the correct answer is B. The correction of a mathematical error in the calculation of prior years' depreciation is a clear-cut case of a prior-period adjustment.

upvoted 0 times