Straight-Line Method Is Used in the First Year When Double

question 102

Multiple Choice

Straight-line method is used in the first year when double declining-balance should be used. This error would cause:

• A) the period's net income to be overstated.
• B) the period's net income to be understated.
• C) the period's end assets to be overstated.
• D) None of these is correct.

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Definitions:

Prior Period Adjustments

Adjustments made to the financial statements to correct errors or omissions in previously issued financial statements.

Treasury Stock

Shares that were issued and subsequently reacquired by the company, reducing the amount of outstanding stock on the open market.

Income Statement

A financial report summarizing the revenues, costs, and expenses incurred during a specific period, typically a fiscal quarter or year.

Income Before Taxes

The total revenue a company generates minus the total expenses before income tax expense is subtracted; an indicator of a company's pre-tax profitability.