【正文】 that is, to all prior periods as if it always had used that method. In other words, all financial statement amounts for individual periods affected by the change and that are included for parison with the current financial statements are revised. In each prior period reported, then, UMC would reduce Common stock by $4 million, Paidin capital – excess of par by $16 million, Retained earnings by $5 million, and Treasury stock by $25 million.The effect of the change on each line item affected should be disclosed for each period reported as well as any adjustment for periods prior to those reported. Also, the nature of and justification for the change should be described in the disclosure notes. Chapter 20 Account。 200 million shares = $4。 9 years) x 4 years 8 Amortization to date (20222022)$10 Unamortized cost (balance in the patent account) 247。 previous financial statements are not revised. Instead, the undepreciated cost remaining at the time of the change would be depreciated by the sumoftheyears’digits method over the remaining useful life. ($ in millions)Asset’s cost $Accumulated depreciation to date (calculated below) ()Undepreciated cost, Jan. 1, 2022 $Estimated residual value ()To be depreciated over remaining 7 years $Calculation of straightline depreciation to date ($35 2) ? 10 years = $ x 3 years = $ Adjusting entry (2022 depreciation):($ in millions)Depreciation expense (calculated below) ............................................. Accumulated depreciation ............................................................ Calculation of SYD depreciation 7 x million = $ million 28** n (n + 1) ? 2 = [7 (8)] ? 2 = 28Chapter 20 Accounting Changes and Error Corrections2010Brief Exercise 206The fact that more royalty revenue was received in April than anticipated in December represents a change in estimate. No adjustments are made to any 2022 financial statements. Feenix would record the following entry at February 1, 2022 upon receiving the 2022 royalties (not required):Cash......................................................................................... 36,500Receivable–royalty revenue ............................................... 36,000Royalty revenue ................................................................. 500Brief Exercise 207The fact that claims were less than expected represents a change in estimate. As a result, no adjustments are made to any 2022 financial statements, and the 2022 warranty expense is unaffected by any previous estimates. 2022 warranty expense is $350,000 times 4%, or $14,000. Quapau would record the following entry to record the expense (not required):Accrued liability and expenseWarranty expense (4% x $350 ,000) ................................................. 14,000Estimated warranty liability ............................................... 14,000Chapter 20 Accounting Changes and Error Corrections2011Brief Exercise 208When an estimate is revised as new information es to light, accounting for the change in estimate is quite straightforward. We do not recast prior years39。 that is, to all prior periods as if it always had used that method. In other words, all financial statement amounts for individual periods that are included for parison with the current financial statements are revised for periodspecific effects of the change. Then, the cumulative effects of the new method on periods prior to those presented are reflected in the reported balances of the assets and liabilities affected as of the beginning of the first period reported and a corresponding adjustment is made to the opening balance of retained earnings for that period. Let’s say Carney reports 20222022 parative statements of shareholders’ equity. The $ million adjustment above is due to differences prior to the 2022 change. The portion of that amount due to differences prior to 2022 is subtracted from the opening balance of retained earnings for 2022. The effect of the change on each line item affected should be disclosed for each period reported as well as any adjustment for periods prior to those reported. Also, the nature of and justification for the change should be described in the disclosure notes. Brief Exercise 202To record the change: ($ in millions)Inventory ($ million – 64 million) ......................................... Retained earnings ..................................................................................... Chapter 20 Accounting Changes and Error Corrections207Brief Exercise 203When a pany changes to the LIFO inventory method from another inventory method, accounting records of prior years often are inadequate to determine the cumulative ine effect of the change for prior years. For instance, it would be necessary to make assumptions as to when specific LIFO inventory layers were created in years prior to the change. So, a pany changing to LIFO generally does not revise the balance in retained earnings. This is the case for Dorsey Markets. No entry is made. Instead, the beginning inventory in the year the LIFO method is adopted ($96 million for Dorsey) bees the base year inventory for all future LIFO calculations. A disclosure note would be included in the financial statements describing the nature of and justification for the change as well as an explanation as to why retrospective application was impracticable. Chapter 20 Accounting Changes and Error Corrections208Brief Exercise 204A change in depreciation method is considered a change in accounting estimate resulting from a change in accounting principle. In other words, a change in the depreciation method is similar to changing the economic useful life of a depreciable asset, and therefore the two events should be reported the same way. Ac