Unsure Inc

question 11

Multiple Choice

Unsure Inc. made a very large arithmetical error in the preparation of its year-end financial statements by incorrect placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the correct amount. When Unsure discovered the error in the following year, correction of the error should be treated as a(n)

• A) adjustment to beginning retained earnings, net of tax.
• B) increase in depreciation expense for the year in which the error is discovered.
• C) gain for the year in which the error was made.
• D) component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements.

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Definitions:

Quantifiable

Capable of being measured or expressed as a quantity, enabling numerical assessment or comparison.

System II

A term often used in psychology to describe the deliberative, analytical form of cognition that requires concentration and is slower than intuitive thinking.

Intuitive Thinking

A cognitive process that involves making judgments and solving problems based on implicit knowledge and feelings, rather than explicit reasoning.

Reasoning

The mental process of generating conclusions, judgments, or inferences from facts or premises.