An Example of a Reclassification Entry Would Be an Entry

question 15

Multiple Choice

An example of a reclassification entry would be an entry:

• A) to reduce inventory when client failed to write down its obsolete raw materials.
• B) to increase the income tax liability account when it was discovered that the tax rate would be higher than originally estimated.
• C) to change material credit balances in accounts receivable accounts to accounts payable accounts.
• D) to increase the allowance for doubtful accounts when it was discovered that a customer had filed for bankruptcy.

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Definitions:

Implicit Rate Of Return

The discount rate that equates the net present value of an investment's expected cash flows with its initial cost, used in capital budgeting.

Incremental Borrowing Rate

The interest rate a company would have to pay if it borrows funds to finance a new project or purchase, used as a benchmark in calculating lease liabilities.

Equipment Lease

A contractual agreement where the owner of equipment allows another party to use the equipment for a specified period in exchange for payment.

Lease Rate

The cost of leasing a tangible or intangible asset, often expressed as a payment amount per period.