Ending Inventory for 2009 Is Overstated by $4,000 Due to a Faulty

question 61

Multiple Choice

Ending inventory for 2009 is overstated by $4,000 due to a faulty count and costing. The tax rate is 30%. Assume the same accounting methods for both financial reporting and taxes. The error is discovered late in 2011. The 2011 annual report shows the financial statements for 2009, 2010, 2011 on a comparative basis.
Which of the following is correct regarding the reporting of this error in the 2011 annual report?

• A) A journal entry is made to report the prior period adjustment, and the 2009 and 2010 statements are shown corrected.
• B) No journal entry is needed, and the 2009 and 2010 statements are shown as they were in the 2010 annual report.
• C) No journal entry is needed, and the 2009 and 2010 statements are shown corrected.
• D) A journal entry is made to report the prior period adjustment, and the 2009 and 2010 statements are shown as they were in the 2010 annual report.

---

Definitions:

Collective Action

Occurs when people act in unison to bring about or resist social, political, and economic change. Some collective actions are routine. Others are nonroutine. Routine collective actions are typically nonviolent and follow established patterns of behavior in existing types of social structures. Nonroutine collective actions take place when usual conventions cease to guide social action and people transcend, bypass, or subvert established institutional patterns and structures.

Political Protest

An expression of objection or disapproval towards political ideas or actions, often in a public context.

Model Parliament

A historical term or concept relating to representative assemblies or efforts to simulate parliamentary democracy as an educational tool.

Economic Development

The process by which a nation improves the economic, political, and social well-being of its people.