A Company Made an Error in Calculating and Reporting Amortization

question 84

Multiple Choice

A company made an error in calculating and reporting amortization expense in Year 1. The error was discovered in Year 2. The item should be reported as a prior period adjustment:

• A) on the Year 2 income statement.
• B) on the Year 1 statement of retained earnings.
• C) on the Year 1 income statement.
• D) accounted for with a cumulative "catch-up" adjustment in Year 2.
• E) on the Year 2 statement of retained earnings.

Learn about continuous budgeting and its benefit for future planning.

Understand the basic concepts and components of the budgeting process.

Differentiate between various types of budgets within a company's budgeting process.

Recognize the sequence of budget preparation and the interconnectivity of budgets.

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Definitions:

Inefficiency

Refers to a lack of efficiency, where resources are not used in the most productive way, often resulting in wasted time or energy.

Monopolies

Market structures where a single producer or seller controls the entire supply of a product or service, often leading to reduced competition.

Efficient Level Output

The Efficient Level Output refers to the quantity of production that achieves the highest possible efficiency in terms of cost and resource usage, often where marginal costs equal marginal revenue.

Profit-maximizing Price

The price level at which a business can achieve the highest possible profit, given its production costs and demand for its products.