An Accounting Change That Is Reported by the Prospective Approach

question 79

Multiple Choice

An accounting change that is reported by the prospective approach is reflected in the financial statements of:

• A) Prior years only.
• B) Prior years plus the current year.
• C) The current year only.
• D) Current and future years.

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Definitions:

Predetermined Overhead Rate

This is a rate used to allocate manufacturing overhead costs to individual units of production, based on a certain activity, such as labor hours or machine hours.

Direct Materials

Substances that can be directly linked to the manufacturing of a particular item.

Direct Labor

Labor costs that can be easily traced to individual units of product; essentially the wages paid to workers who directly manufacture goods.

Manufacturing Overhead

All indirect manufacturing costs, including but not limited to utilities, rent, and salaries of supervisors.