Which of the Following Errors Normally Would Not Be Automatically

question 36

Multiple Choice

Which of the following errors normally would not be automatically corrected over two accounting periods?

• A)failure to record prepaid revenue
• B)failure to record accrued payroll liabilities
• C)failure to record depreciation expense
• D)failure to count inventory in transit at year-end

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Definitions:

Gross Profit

The financial gain obtained after deducting the cost of goods sold from total sales revenue.

Intra-entity Inventory

Inventory transactions occurring between divisions or subsidiaries within the same parent company, which may need elimination during consolidation.

Goodwill

The excess of the purchase price of a business over the fair market value of its identifiable assets and liabilities, recognized as an intangible asset on the balance sheet.

Equity Method

An accounting technique used to record an investor's proportional share of an associate company's net income or loss on its financial statements.