Which of the Following Is an Example of Managing Earnings

question 99

Multiple Choice

Which of the following is an example of managing earnings down?

• A) Changing estimated bad debts from 3 percent to 2.5 percent of sales.
• B) Revising the estimated life of equipment from 10 years to 8 years.
• C) Not writing off obsolete inventory.
• D) Reducing research and development expenditures.

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Definitions:

Goodwill

A non-material asset generated from purchasing another company at a cost exceeding the fair market value of its tangible net assets.

Paid-In-Capital Accounts

Accounts representing the funds contributed by shareholders over and above the nominal value of the shares; it's an equity item on the balance sheet.

Consolidating Journal Entry

A journal entry made in the process of combining the financial statements of several departments or subsidiaries into a single set of statements.

Wholly Owned Subsidiary

A company whose entire stock is held by another company, making it completely controlled by the parent company.