During the Past Year, a Company Had Some Land Expropriated

question 79

Multiple Choice

During the past year, a company had some land expropriated by the local government when the city was widening a road.Management included the gain in operating income as an offset to losses incurred on the sale of some other assets, as they decided that both events were related to fixed assets.This decision by management could be interpreted as earnings management for which of the following reasons?

• A)It violates the principles of revenue recognition.
• B)It involves management manipulation regarding the timing of the write-down of an asset.
• C)It is an example of a big bath.
• D)It does not disclose the information on the income statement as per the accounting principles and standards.

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Definitions:

Surplus

The amount by which the supply of a product exceeds its demand, often leading to lower prices.

Market For Butter

The economic platform where buyers and sellers engage in the exchange of butter, determining its price and quantity available.

Price Floor

A government or group-imposed price control that sets the minimum allowed price above the equilibrium price, potentially leading to surpluses.

Inefficiency

A situation where resources are not used in the most effective way, leading to waste or a loss of potential utility.