A Change in Accounting Principle from One That Is Not

question 2

Multiple Choice

A change in accounting principle from one that is not generally accepted to one that is generally accepted should be treated as

• A)an error and corrected by prior period adjustment
• B)a change in accounting principle and the cumulative effect included in net income
• C)a change in accounting principle and prior period financial statements are restated
• D)a change in accounting principle and adjustments made prospectively

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Definitions:

Least-Squares Regression

A statistical method used to determine and approximate the relationship between variables, minimizing the squared differences between observed and predicted values.

Fixed Cost

Costs that do not vary with the level of production or sales, remaining constant regardless of business activities.

High-Low Method

A technique used in cost accounting to estimate variable and fixed costs by analyzing the highest and lowest levels of activity and their associated costs.

Variable Cost

Variable costs are expenses that vary directly with the level of production or sales volume, such as raw materials and packaging.