Question

1. ASC 250 specifies that the effects of a change in accounting principle should be recorded on a prospective basis when the change is from the

a. Presentation of statements of individual companies to their inclusion in consolidated statements.

b. Straight-line method of depreciation for previously recorded assets to the double-declining balance method.

c. Cash basis of accounting for vacation pay to the accrual basis.

d. Completed-contract method of accounting for long-term construction-type contracts to the percentage-of-completion method.

2. On December 31, 20X2, Dirk Corp. sold Smith Co. two airplanes and simultaneously leased them back. Additional information pertaining to the sale-leasebacks follows:

Plane #1

Plane #2

Sales price

$600,000

$1,000,000

Carrying amount, 12/31/X2   

$100,000

$550,000

Remaining useful life, 12/31/X2   

10 years

35 years

Lease term

8 years

3 years

Annual lease payments

$100,000

$30,000

In its December 31, 20X2, balance sheet, what amount should Dirk report as deferred gain on these transactions?

a. $0

b. $450,000

c. $500,000

d. $950,000