A Retailer Increases Bad Debts Expense from 2

question 28

Multiple Choice

A retailer increases bad debts expense from 2.5% to 3% of credit sales. Given this information, which of the following statements is correct?

• A)The net income of prior years is overstated and a retrospective correction should be made.
• B)This is a change in estimate and should be treated prospectively.
• C)This is a change in accounting policy and treatment is retrospective.
• D)This is a correction of an error and a retrospective correction should be made.

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Definitions:

Anticline

A type of fold in the Earth's crust that is convex up and has its oldest beds at its core.

Joint

A fracture or separation in rock in which there has been no significant movement of the sides relative to one another.

Geologic Processes

The natural mechanisms through which Earth's surface is shaped and changed over time, including erosion, sedimentation, and tectonic movements.

James Hutton

Often referred to as the "Father of Modern Geology," he was an 18th-century Scottish scientist who proposed the principle of uniformitarianism.