USGAAP and IFRS Require Firms to Account for Correction of Errors

question 190

Multiple Choice

U.S.GAAP and IFRS require firms to account for correction of errors, if material, by

• A)restating net income of prior periods and adjusting the beginning balance in Retained Earnings for the current period.
• B)restating net income of prior periods and adjusting the ending balance in Retained Earnings for the current period.
• C)restating net income of the current period and adjusting the beginning balance in Retained Earnings for the current period.
• D)restating net income of the current period and adjusting the ending balance in Retained Earnings for the current period.
• E)restating net income of the current period, only.

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Definitions:

Deposit Multiplier

The ratio that measures the potential impact of a change in banking reserves on the money supply, indicating how much money banks can create with each dollar of reserves.

Fed Funds Rate

The interest rate at which depository institutions lend reserve balances to other depository institutions overnight, a vital monetary policy tool used by the Federal Reserve.

Discount Rate

The rate at which the central bank lends money to commercial banks and other financial institutions through its discount window.

Open Market Operations

Open Market Operations involve the buying and selling of government securities by a central bank to control the money supply and interest rates in the economy.