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:

U.S. Exports

involve products and services that are produced in the United States and sold to other countries, contributing to the country's GDP.

Aggregate Demand Curve

A graphical representation showing the relationship between the overall price level and the total demand for goods and services in an economy.

Marginal Propensity

The proportion of an additional income that an individual spends on consuming goods and services, rather than saving.

Consumption Function

An economic formula representing the relationship between total consumption and gross national income, suggesting how income influences spending behavior.