What Changes Would Be Expected in RV, VC and TLC

question 9

Multiple Choice

What changes would be expected in RV, VC and TLC with aging?

• A) VC and TLC will decrease while RV remains constant
• B) RV and TLC will increase while VC will decrease
• C) RV will increase, VC will decrease, and TLC will remain constant
• D) RV will decrease, VC and TLC will remain constant

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Definitions:

Cookie Jar Reserves

Accounting practices where companies set aside reserves during good financial periods to smooth out earnings in future, less favorable periods.

Estimated Obligations

The predicted liabilities or commitments a company expects to incur in the future, often found in financial planning and budgetary processes.

Overreserving

Overreserving refers to setting aside more funds or reserves than necessary for anticipated obligations or liabilities, which can affect a company's financial statements by overstating expenses.

Prior Period Adjustment

Adjustments made to a company's financial statements to correct errors or misstatements in previously issued financial reports.