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In which of the following situations should a company report a prior-period adjustment?
Suggested Answer: B
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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.
40 comments · newest first
EM
Emilio
10 months ago
C just feels wrong to me, can someone explain?
EL
Elke
11 months ago
I agree with B, that’s a clear mistake that needs fixing!
LA
Laura
11 months ago
Wait, are we really reporting for a change in useful life? Seems odd.
OC
Octavio
11 months ago
A change in depreciation method isn't a prior-period adjustment, right?
MA
Malcolm
11 months ago
Definitely B, gotta correct those errors!
RO
Rory
12 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.
CO
Coletta
12 months ago
I practiced a similar question where we discussed prior-period adjustments, and I feel like B was the right answer there too.
KR
Kris
12 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?
IN
Inocencia
1 year 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.
EL
Elly
1 year 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.
KA
Kallie
1 year 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.
JA
Jacquelyne
1 year 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.
CH
Cheryl
1 year ago
This question seems straightforward, I think the answer is B - the correction of a mathematical error in the calculation of prior years' depreciation.
JO
Jolene
1 year 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.
MA
Maricela
1 year 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.
ST
Stefania
1 year ago
I remember discussing PII in class, but I'm not sure if it includes both PII and plain text name value pairs.
GA
Gabriele
1 year 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!
EL
Elroy
1 year ago
C) A switch from the straight-line to double-declining balance method of depreciation.
LE
Lezlie
1 year ago
B) The correction of a mathematical error in the calculation of prior years' depreciation.
JA
Janella
1 year ago
A) A change in the estimated useful lives of fixed assets purchased in prior years.
NI
Nichelle
1 year 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.
AN
Antonio
1 year ago
A) A change in the estimated useful lives of fixed assets purchased in prior years.
MA
Matthew
1 year 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.
LE
Leonora
1 year ago
B) The correction of a mathematical error in the calculation of prior years' depreciation.
MI
Mindy
1 year 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?
SH
Shawnda
1 year ago
C) A switch from the straight-line to double-declining balance method of depreciation.
NO
Novella
1 year ago
I agree, it's important to correct any errors in the calculations.
VO
Vonda
1 year ago
B) The correction of a mathematical error in the calculation of prior years' depreciation.
EN
Ena
1 year ago
A) A change in the estimated useful lives of fixed assets purchased in prior years.
BO
Bonita
1 year 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.
BO
Bok
1 year ago
User 2: I agree, but I think B is a better option. Correcting a mathematical error makes sense.
RH
Rhea
1 year ago
User 1: I think A is a good choice for a prior-period adjustment.
LA
Laurel
1 year 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?
RO
Roxane
1 year ago
I agree with Cyndy. It's important to reflect the correct information in the financial statements.
CY
Cyndy
1 year 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.
IZ
Izetta
2 years 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.
CO
Corazon
1 year ago
That would also require a prior-period adjustment. So, A is correct too.
SI
Sina
1 year ago
What about option A? A change in estimated useful lives of fixed assets purchased in prior years.
BU
Bulah
1 year ago
Yes, you're right. The correction of a mathematical error is a prior-period adjustment.
HO
Hoa
1 year ago
I think the correct answer is B.