Which of the Following Is an Accounting Error

question 33

Multiple Choice

Which of the following is an accounting error?

• A)Inventory was sold below carrying amount even though the inventory had been previously written down to the lower of cost and net realizable value.
• B)Convertible securities that were identified as dilutive for computing diluted EPS were not converted by the expiration date.
• C)A change in economic conditions resulted in the fair value of goodwill declining from $15 million to $10 million.
• D)Development costs of an intangible asset were capitalized when only five of six criteria for capitalization had been satisfied.

---

Definitions:

Lemons

In economics, refers to products of lower quality that cannot be distinguished from higher quality products before purchase, derived from the market for used cars analyzed by George Akerlof.

Expected Value

A statistic that measures the mean, or average, outcome of a set of probabilities or a random variable.

English Auction

A method of auctioning in which the price ascends with successive bids and remains with the highest bidder who then wins the auctioned item.

Reservation Price

The maximum price a consumer is willing to pay for a good or service, beyond which they would prefer not to make a purchase.