Watts Corporation Made a Very Large Arithmetical Error in the Preparation

question 23

Multiple Choice

Watts 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 depreciation. 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 depreciation 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) an other expense item for the year in which the error was made.
• D) a prior period adjustment.

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Definitions:

Unfreezing

The first step in Lewin’s change model, in which individuals are encouraged to discard old behaviors by shaking up the equilibrium state that maintains the status quo.

Organization Development

is a systematic practice aimed at improving organizational effectiveness and employee well-being through planned interventions in the organization's processes.

Intervention

The action taken to become involved in a situation in order to help alter the outcome or improve the circumstances.

Diagnosis

The identification of the nature or cause of a condition, situation, or problem.