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AICPA Exam CPA-Financial Topic 3 Question 27 Discussion
Topic #: 3
In single period statements, which of the following should not be reflected as an adjustment to the opening balance of retained earnings?
Choice 'b' is correct. A change in the estimated useful life of a depreciable asset is a change in estimate handled prospectively. No adjustment to retained earnings is necessary.
Choice 'a' is incorrect. The correction of a failure to provide for uncollectible accounts is considered to be a correction of an error. The opening balance of retained earnings would be adjusted to correct the error.
Choice 'c' is incorrect. This change is a change in accounting principle and is handled retrospectively.
With retrospective application, the opening balance of retained earnings would be adjusted to reflect the cumulative effect of the changes.
Choice 'd' is incorrect. This change is a change in accounting principle and is handled retrospectively.
With retrospective application, the opening balance of retained earnings would be adjusted to reflect the cumulative effect of the changes.
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