If a Company Makes a Prior Period Adjustment, Which of the Following

question 11

Multiple Choice

If a company makes a prior period adjustment, which of the following describes how it must be reported?

• A)The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are not changed.
• B)The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are adjusted.
• C)The adjustment is reported in the current period's income statement as a separate item.
• D)The adjustment is recorded as a deferred asset or deferred liability and amortized using the straight-line method.

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Definitions:

College Degree

A certification awarded by colleges or universities to signify that a student has completed a specified course of study, typically representing a higher level of education and expertise.

Stock

In finance, stock represents ownership shares in a company, allowing investors to claim on the company's assets and earnings proportionate to the amount of stock they own.

Economy

A system of production, distribution, and consumption of goods and services among a group of people.

Opportunity Cost

The detriment of not pursuing the second-top option when engaging in decision-making.