Which of the Following Statements Is TRUE About Prior Period

question 94

Multiple Choice

Which of the following statements is TRUE about prior period adjustments?

• A) Prior period adjustments require a complete restatement of prior year financial reports.
• B) Prior period adjustments are shown on the statement of retained earnings as corrections to the beginning balance.
• C) Prior period adjustments affect balance sheet accounts only, and must be included on single-step income statements.
• D) Prior period adjustments must be included as a separate line item on a multi-step income statement.

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Definitions:

Incremental Value

The additional value generated by undertaking a particular action, such as an investment or project.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including both public investors and company officers or insiders.

Equity-Financed

This refers to the method of funding a business or purchasing assets using primarily equity rather than debt.

Merger Premium

The additional amount that a company pays over the current market value of a target company during an acquisition, reflecting the anticipated synergy value.