Adjusting Entries That Reflect a Change in Accounting Principle Used

question 14

Multiple Choice

Adjusting entries that reflect a change in accounting principle used to value inventories are classified as

• A)corrections.
• B)estimates.
• C)deferrals.
• D)revaluations.

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Definitions:

Disinflation

A decrease in the rate of inflation, indicating a slowdown in the rate at which prices for goods and services are rising.

Nominal Interest Rates

The reported percentage rate without adjusting for the inflation rate, reflecting the cost of borrowing money.

Unemployment

The situation where individuals who are able and willing to work are unable to find a job, expressed as a percentage of the labor force.

Real Rate of Interest

The rate of interest an investor expects to receive after allowing for inflation, distinguishing from the nominal rate of interest, which does not account for inflation.