Sure Corporation Made a Very Large Arithmetical Error in the Preparation

question 44

Multiple Choice

Sure Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of amortization.The error caused the net income to be reported at almost double the proper amount.Correction of the error when discovered in the next year should be treated as

• A)an increase in amortization expense for the year in which the error is discovered.
• B)a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements.
• C)a gain for the year in which the error was made.
• D)an adjustment to beginning retained earnings, net of tax.

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Definitions:

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Historical Facts

Historical facts are pieces of information about past events that are considered to be true based on evidence and research.

Pavlovian Conditioning

A learning process in which an initially neutral stimulus becomes associated with a specific response through pairing with a stimulus that naturally evokes that response.

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A learning process through which behavior is modified using rewards or punishments, also known as operant conditioning.