Management Misstatement of Financial Statements Often Occurs in Order to Receive

question 52

Multiple Choice

Management misstatement of financial statements often occurs in order to receive indirect benefits such as:

• A)Decreased income taxes
• B)Delayed cash flows
• C)Increased stock prices
• D)Increased dividends

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Definitions:

Net Method

An accounting method for recording purchases where the purchase price includes a cash discount for early payment.

Periodic Inventory System

An accounting method where inventory is physically counted and valued at set intervals, affecting the cost of goods sold calculation.

Discounts Lost

Refers to the additional cost a company incurs for not taking advantage of the cash discounts offered by suppliers for early payments.

Net Method

The Net Method is an accounting procedure that records the purchase of goods or services after deducting any discounts for early payment.