Managers May Engage in Classification Shifting By

question 175

Multiple Choice

Managers may engage in classification shifting by:

• A) reporting sales to fictitious customers to inflate reported revenues.
• B) reduce estimates of accrued expenses to inflate reported net income.
• C) reporting operating expenses as nonoperating expenses to inflate reported operating income.
• D) increasing estimates of accrued expenses to inflate reported net income.

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Definitions:

Promissory Estoppel

A legal principle that prevents a party from withdrawing a promise made to another party, if the latter has reasonably relied on that promise to their detriment.

Hamer v. Sidway

A landmark case in contract law regarding forbearance as consideration, where a promise not to do something can be as legally binding as a promise to do something.

Unforeseen Circumstances

Situations or events that could not have been predicted or expected, often leading to disruptions in agreements or plans.

Preexisting Duty Rule

A legal principle stating that an existing contractual obligation cannot serve as consideration for a new contract.