Which of the Following Is True of Accounting for Changes

question 35

Multiple Choice

Which of the following is true of accounting for changes in estimates?

• A) A company recognizes a change in estimate by making a retrospective adjustment to the financial statements
• B) A company accounts for changes in estimates only in the period of change, even though it affects the future periods
• C) Changes in estimates are not carried back to adjust prior years
• D) Changes in estimates are considered as errors or extraordinary items

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Definitions:

Marginal Rate of Substitution

The rate at which a consumer is willing to give up one good in exchange for another good while keeping their level of satisfaction unchanged.

Good X

A generic term for an economic good or commodity that can be used to satisfy wants or needs.

Good Y

A hypothetical or generic item used in economic examples or models to represent a type of product or service in the market.

Units

Basic quantities or measures adopted to quantify and express variables in a particular field or for specific goods.