Question

(Accounting for Accounting Changes and Errors) Listed below are various types of accounting changes and errors.

______ 1. Change in a plant asset’s salvage value.

______ 2. Change due to overstatement of inventory.

______ 3. Change from sum-of-the-years’-digits to straight-line method of depreciation.

______ 4. Change from presenting unconsolidated to consolidated financial statements.

______ 5. Change from LIFO to FIFO inventory method.

______ 6. Change in the rate used to compute warranty costs.

______ 7. Change from an unacceptable accounting principle to an acceptable accounting principle.

______ 8. Change in a patent’s amortization period.

______ 9. Change from completed-contract to percentage-of-completion method on construction contracts.

______ 10. Change from FIFO to average-cost inventory method.

Instructions For each change or error, indicate how it would be accounted for using the following code letters:

(a) Accounted for prospectively.

(b) Accounted for retrospectively.

(c) Neither of the above.

Short answer

The accounting treatment for each change or error is stated in Step 2.

Step-by-step solution

Definition of salvage value

Salvage value is defined as the asset’s estimated value at which it can sell at the end of its useful life.

Accounting treatment

Serial Number	Accounting treatment
1.	Accounted for prospectively
2.	Accounted for retrospectively
3.	Accounted for prospectively
4.	Accounted for retrospectively
5.	Accounted for retrospectively
6.	Accounted for prospectively
7.	Accounted for retrospectively
8.	Accounted for prospectively
9.	Accounted for retrospectively
10.	Accounted for retrospectively