Question

At the beginning of 2024, Wagner Implements undertook a variety of changes in accounting methods, corrected several errors, and instituted new accounting policies.

Required:
Identify for each item below the type of change and the reporting approach Wagner would use.

Type of Change (choose one) Reporting Approach (choose one)
P. Change in accounting principle R. Retrospective approach
E. Change in accounting estimate P. Prospective approach
EP. Change in estimate resulting from a change in principle
X. Correction of an error
N. Neither an accounting change nor an accounting error.

Answer 1

Wagner Implements underwent changes in accounting methods, corrected errors, and implemented new accounting policies. Different types of changes and reporting approaches were involved.

Step-by-step explanation:

There are two primary methods of accounting— cash method and accrual method.

• The alternative bookkeeping method is a modified accrual method, which is a combination of the two primary methods.
• Cash method—income is recorded when it is received, and expenses are recorded when they are paid.

In this case, at the beginning of 2024, Wagner Implements undertook a variety of changes in accounting methods, corrected several errors, and instituted new accounting policies. Here is how each item would be classified:

• P. Change in accounting principle - R. Retrospective approach

• E. Change in accounting estimate - P. Prospective approach

• EP. Change in estimate resulting from a change in principle

• X. Correction of an error

• N. Neither an accounting change nor an accounting error.