Why this is mistaken
Why the model fails
A later revision can reflect new information rather than a defect in earlier accounting. In the bounded Beacon facts, the first three years used supportable information available at those dates. The revision therefore begins with the $18,000 carrying amount at the change date and changes the remaining allocation.
Diagnostic contrast
Ask what would change if Beacon had ignored a binding contract limit already in its files. A strong response changes the classification analysis because the information timeline changed. A weak response applies “prospective” or “restatement” as a memorized label without investigating evidence.
Corrective rule
First classify the event using the information available at each date. Only then choose the period treatment and perform the arithmetic.
Where to watch
When this mistake may appear
- A residual value, useful life, expected quantity, or other estimate changes after prior periods have closed.
- The problem supplies both original and revised inputs but does not explicitly label the change or an error.
Check your work
Your work may contain this mistake if:
- Recomputes all prior-period depreciation using the revised useful life or residual value.
- Calls every difference between estimate and outcome proof that the original statements were wrong.
- Ignores evidence about what information was available when the original estimate was made.