Estimations Are Frequently Made in the Income Statement in Relation

question 39

Multiple Choice

Estimations are frequently made in the income statement in relation to items such as bad debts,inventory obsolescence,an asset's useful life,and the expected pattern of consumption of economic benefits of depreciable assets.The effect of these estimations on the income statement is to:

• A) Increase the variability of profits.
• B) Make the statement unreliable.
• C) Reduce the relevance of the profit figures reported.
• D) All of the given answers.
• E) None of the given answers.

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Definitions:

Matched by Employer

A benefit where an employer matches the contributions their employees make to a retirement plan, up to a certain percentage.

Installment Note Payable

A debt instrument that requires a series of payments over a specified period until the full amount is paid off.

Principal Amount

The initial amount of money borrowed or invested, excluding any interest or dividends.

Equal Annual Payments

Regular payments of the same amount made over a specified period of time, often used in loans and annuities.