Multiple choice

1. Which of the following changes would not be accounted for using the prospective approach? (Points : 8) 

A change to LIFO from average costing for inventories

A change from the individual application of the LCM rule to aggregate approach

A change from straight-line to double-declining balance depreciation

A change from double-declining balance to straight-line depreciation

2. When the retrospective approach is used for a change to the FIFO method, which of the following accounts is usually not adjusted? (Points : 8) 

Deferred Income Taxes

Inventory

Retained Earnings

All of the above usually are adjusted

3. If a change is made from straight-line to SYD depreciation, one should record the effects by a journal entry including (Points : 8) 

a credit to deferred tax liability.

a credit to accumulated depreciation.

a debit to depreciation expense.

No journal entry is required.

4. A change that uses the prospective approach is accounted for by (Points : 8) 

implementing it in the current year.

reporting pro forma data.

retrospective restatement of all prior financial statements in a comparative annual report.

giving current recognition of the past effect of the change.