ASH ACC 306 W EEK 3 I NTEGRATING C ASE 16-5 C HECK THIS A+ TUTORIAL GUIDELINE AT HTTP :// WWW. ASSIGNMENTCLOUD. COM / ACC ASH / ACC WEEK -3- INTEGRATING - CASE F OR MORE CLASSES VISIT HTTP :// WWW. ASSIGNMENTCLOUD. COM I NTEGRATING C ASE 16–5 - W ILLIAMS -S ANTANA, I NC. - T AX EFFECTS OF ACCOUNTING CHANGES AND ERROR CORRECTION ; SIX SITUATIONS ● LO1 LO2 LO8 W ILLIAMS -S ANTANA, I NC. IS A MANUFACTURER OF HIGH - TECH INDUSTRIAL PARTS THAT WAS STARTED IN 1997 BY TWO TALENTED ENGINEERS WITH LITTLE BUSINESS TRAINING. I N 2011, THE COMPANY WAS ACQUIRED BY ONE OF ITS MAJOR CUSTOMERS. A S PART OF AN INTERNAL AUDIT, THE FOLLOWING FACTS WERE DISCOVERED. T HE AUDIT OCCURRED DURING 2011 BEFORE ANY ADJUSTING ENTRIES OR CLOSING ENTRIES WERE PREPARED. T HE INCOME TAX RATE IS 40% FOR ALL YEARS. HTTP :// WWW. ASSIGNMENTCLOUD. COM / ACC ASH / ACC WEEK -3- INTEGRATING - CASE HTTP :// WWW. ASSIGNMENTCLOUD. COM

A. A FIVE - YEAR CASUALTY INSURANCE POLICY WAS PURCHASED AT THE BEGINNING OF 2009 FOR $35,000. T HE FULL AMOUNT WAS DEBITED TO INSURANCE EXPENSE AT THE TIME. B. O N D ECEMBER 31, 2010, MERCHANDISE INVENTORY WAS OVERSTATED BY $25,000 DUE TO A MISTAKE IN THE PHYSICAL INVENTORY COUNT USING THE PERIODIC INVENTORY SYSTEM. C. T HE COMPANY CHANGED INVENTORY COST METHODS TO FIFO FROM LIFO AT THE END OF 2011 FOR BOTH FINANCIAL STATEMENT AND INCOME TAX PURPOSES. T HE CHANGE WILL CAUSE A $960,000 INCREASE IN THE BEGINNING INVENTORY AT J ANUARY 1, D. A T THE END OF 2010, THE COMPANY FAILED TO ACCRUE $15,500 OF SALES COMMISSIONS EARNED BY EMPLOYEES DURING T HE EXPENSE WAS RECORDED WHEN THE COMMISSIONS WERE PAID IN EARLY E. A T THE BEGINNING OF 2009, THE COMPANY PURCHASED A MACHINE AT A COST OF $720,000. I TS USEFUL LIFE WAS ESTIMATED TO BE 10 YEARS WITH NO SALVAGE VALUE. T HE MACHINE HAS BEEN DEPRECIATED BY THE DOUBLE DECLINING - BALANCE METHOD. I TS CARRYING AMOUNT ON D ECEMBER 31, 2010, WAS $460,800. O N J ANUARY 1, 2011, THE COMPANY CHANGED TO THE STRAIGHT - LINE METHOD.