When an Accounting Change Is to Be Recorded and Reported

question 18

Multiple Choice

When an accounting change is to be recorded and reported under the Retrospective approach,the:

• A) Retained earnings is adjusted for the cumulative effect of the change.
• B) Cumulative effect of the change is reported as a special item in the income statement in the year of the change.
• C) Effect of the change is spread over the past, current, and future accounting periods.
• D) Pro forma financial statements for future years must be disclosed.

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Definitions:

Marginal Cost Curve

A graphical representation that shows the change in the total cost of producing one more unit of a good.

Price Elasticity

The influence exerted by price variations on the demand level of a specific good quantified.

Price-Discriminate

The practice of charging different prices to different consumers for the same good or service, based on factors like location, buying habits, or willingness to pay.

Higher Prices

Typically the result of increased demand or reduced supply, leading to a rise in the cost of goods and services.