At the End of 2014 It Is Discovered That the Accountant

question 102

Multiple Choice

At the end of 2014 it is discovered that the accountant for Gower Company failed to record $60,000 of interest payable which had accrued since the last interest payment date. The current ratio, quick ratio and debt ratio, as well as the financial statements, had already been computed using the erroneous data. Correction of the accounting records will have which of the following effects?

• A) Profit as formerly computed will not be affected by the correction of the error.
• B) The interest coverage ratio as formerly computed will not change as a result of the correction.
• C) The debt ratio as formerly computed will decrease as a result of the correction.
• D) The quick ratio as formerly computed will decrease as a result of the correction.

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Definitions:

Bylaws

A set of governing rules adopted by a corporation or other association.

Organizational Meeting

An initial gathering designed to establish the structure or operation of an organization, committee, or project.

Corporation Adopts

The process through which a corporation formally adopts policies, procedures, or changes in structure.

Declaring Dividends

The action by a company's board of directors to distribute a portion of earnings to shareholders as a reward for their investment.