A Prior Period Adjustment Is Reported As

question 3

Multiple Choice

A prior period adjustment is reported as:

• A) An unusual item in the income statement
• B) An addition to (or deduction from) net income in the income statement
• C) An addition to (or a deduction from) the beginning balance of retained earnings
• D) An addition to (or deduction from) the ending balance of retained earnings

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Definitions:

Legal and Administrative Expenses

Costs associated with the legal operation of a business and general administrative tasks, including legal fees, licensing, and managerial salaries.

Bankruptcy

is a legal process through which individuals or businesses unable to meet their financial obligations can seek relief from some or all of their debts.

Weighted Average Cost of Capital

A calculation of a firm's cost of capital, wherein each category of capital is proportionally weighted.

Interest Tax Shield

A deduction that companies can take from their taxable income for the interest payments they have made on their debt, effectively reducing their taxable income.