E 20-18 Classifying accounting changes
Indicate with the appropriate letter the nature of each situation described below
Type of change
PR change in principle reported retrospectively
PP change in principle reported prospectively
E change in estimate
EP change in estimate resulting from a change in principle
R change in reporting entity
N not an accounting change
1. Change from declining balance depreciation to straight-line
2. Change in the estimate useful life of office equipment
3. Technological advance that renders worthless a patent with an unamortized cost of $45,000.
4. Change from determining lower of cost or market for the inventories by the individual item approach to the aggregate approach.
5. Change from LIFO inventory costing to the weighted-average inventory costing.
6. Settling a lawsuit for less than the amount accrued previously as a loss contingency.
7. Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years.
8. Change by the retail store from reporting bad debt expense on a pay-as-you-go basis to the allowance method.
9. A shift of certain manufacturing overhead cost to inventory that previously were expensed as incurred to more accurate measure cost of goods sold. (Either method is generally acceptable).
10. Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.
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