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A Company Made an Error in Recording the 2016 Purchase

question 193

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A company made an error in recording the 2016 purchase of computer equipment as an expense. This was discovered in 2017. The item should be reported as a prior period adjustment on the 2017 income statement.


Definitions:

Par Common Stock

The nominal or face value assigned to common shares by the company's charter, which has little relation to the market value of the shares.

Stock Dividend

A dividend payment made in the form of additional shares rather than a cash payout.

Retained Earnings

Profits that are held back in a company to be reinvested in its operations or to pay down debt rather than being distributed to shareholders as dividends.

Treasury Stock

Stocks that the issuing entity initially distributed and then bought back, decreasing the number of shares available for trade on the open market.

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