For Each of the Following Scenarios, Determine the Effects (If

question 7

Essay

For each of the following scenarios, determine the effects (if any)of the accounting change (correction of error, change in accounting policy, or change in estimate)on the relevant asset or liability, equity, and comprehensive income in the year of change and the prior year. Use the following table for your response.

A. Company A increases the allowance for doubtful accounts (ADA). Using the old estimate, ADA would have been $71,000. The new estimate is $74,000.
B. Company B omitted to record an invoice for a $7,000 sale made on credit at the end of the previous year and incorrectly recorded the sale in the current year. The related inventory sold has been accounted for.
C. Company C changes its revenue recognition policy to a more conservative one. The result is a decrease in prior year revenue of $4,200 and a decrease in current-year revenue of $6,300 relative to the amounts under the old policy.

Understand the role of growth rates in the valuation of companies not currently paying dividends.

Evaluate the impact of EPS and NPVGO on stock valuation.

Understand the concepts of independent and dependent variables and their roles in experiments.

Recognize the advantages and disadvantages of survey research.

---

Definitions:

Negative Emotions

Emotions that are generally perceived as undesirable, such as sadness, anger, and fear, and are often a response to undesirable experiences or thoughts.

Adaptation-level Phenomenon

The psychological experience of judging new stimuli and events based on past experiences or a baseline level of past stimuli.

Day-to-day Happiness

The experience of joy, contentment, or positive well-being, combined with a sense that one's life is good, meaningful, and worthwhile on a daily basis.

Money Buy Happiness

The debate concerning whether material wealth can significantly increase an individual's level of happiness or well-being.