Information for a Firm Making an Accounting Change Follows

question 7

Essay

Information for a firm making an accounting change follows: Tax rate: 30%
Common shares outstanding entire year for both years: 100; Retained earnings, 1/1/x0: $6,000
The firm changes from SYD to SL depreciation in 20x1 for financial reporting purposes only. Required:
(a)The 20x1 entries to record the accounting change and depreciation expense for 20x1.
(b)The comparative 20x0 and 20x1 income statements including pro forma disclosures if needed, EPS, and any disclosure footnote required.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard cost allocated, based on the actual activity level.

Variable Overhead Standards

The predetermined costs associated with variable overheads that are expected to be incurred under normal operating conditions.

Direct Labor-hours

The total hours worked directly on manufacturing a product or providing a service, used as a basis for allocating labor costs in product costing.

Quantity Standard

Pre-determined measure set for the amount of input that should be used in producing a unit of output.