university of california Operations And Supply Chain Management Assignment Help - The company changed

Question - Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2001 by two
talented engineers with little business training. In 2013, the company was acquired by one of its major
customers. As part of an internal audit, the following facts were discovered. The audit occurred during
2013 before any adjusting entries or closing entries were prepared.
a. A five-year casualty insurance policy was purchased at the beginning of 2011 for $35,000. The full
amount was debited to insurance expense at the time.
b.
Effective January 1, 2013, the company changed the salvage value used in calculating
depreciation for its office building. The building cost $600,000 on December 29, 2002, and has
been depreciated on a s ...Read More traight-line basis assuming a useful life of 40 years and a salvage value of
$100,000. Declining real estate values in the area indicate that the salvage value will be no more
than $25,000.
c. On December 31, 2012, merchandise inventory was overstated by $25,000 due to a mistake in
the physical inventory count using the periodic inventory system.
d.
The company changed inventory cost methods to FIFO from LIFO at the end of 2013 for both
financial statement and income tax purposes. The change will cause a $960,000 increase in the
beginning inventory at January 1, 2014.
e.
At the end of 2012, the company failed to accrue $15,500 of sales commissions earned by
employees during 2012. The expense was recorded when the commissions were paid in early
2013.
f.
At the beginning of 2011, the company purchased a machine at a cost of $720,000. Its useful life
was estimated to be 10 years with no salvage value. The machine has been depreciated by the
double-declining balance method. Its carrying amount on December 31, 2012, was $460,800. On
January 1, 2013, the company changed to the straight-line method.
g.
Warranty expense is determined each year as 1% of sales. Actual payment experience of recent
years indicates that 0.75% is a better indication of the actual cost. Management effects the
change in 2013. Credit sales for 2013 are $4,000,000; in 2012 they were $3,700,000.
Required:
For each situation:
1.
Identify whether it represents an accounting change or an error. If an accounting change, identify
the type of change.



2.
Prepare any journal entry necessary as a direct result of the change or error
correction as well as any adjusting entry for 2013 related to the situation described.
(Ignore tax effects.) ...Read Less

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