Question

Indicate how the following items are recorded in the accounting records in the current year of Coronet Co. (a) Impairment of goodwill. (b) A change in depreciating plant assets from accelerated to the straight-line method. (c) Large write-off of inventories because of obsolescence. (d) Change from the cash basis to accrual basis of accounting. (e) Change from LIFO to FIFO method for inventory valuation purposes. (f) Change in the estimate of service lives for plant assets

Short answer

Goodwill is an intangible asset, and the items are recorded in the manner described in step 2.

Step-by-step solution

Definition of goodwill

Goodwill is defined as the intangible asset generated when another company buys one company.

Effect of the items

1. It will be charged to expense- possibly separately disclosed.
2. There will be a change in estimates by a change in accounting principle- currently and prospectively.
3. It is a charge to expense- possibly separately disclosed.
4. Correction of an error will be reported as the prior period adjustments.
5. Change in accounting principle- retrospective application to all affected prior period financial information
6. It is a change in accounting estimate -currently and prospectively.