When a Mandatory Change in Accounting Policy Occurs

question 35

Multiple Choice

When a mandatory change in accounting policy occurs

• A)all prior years' financial statements must be changed to reflect the newly adopted policy.
• B)it is always accounted for prospectively.
• C)the new policy is used in reporting the results of operating activities for the current year.
• D)the cumulative effect of the change in policy should be reflected on the current income statement.

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Definitions:

Purchasing Power

The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.

Real Cost

The total cost of producing a good or service, including both the monetary and opportunity costs.

NBA Basketball Game

A professional basketball contest between teams of the National Basketball Association.

CPI (Consumer Price Index)

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.