If a Material Accounting Error Was Made in a Prior

question 14

Multiple Choice

If a material accounting error was made in a prior year,that error:

• A)Should be reflected on the current year's income statement.
• B)Should be reflected,net of taxes,on the retained earnings statement.
• C)Should be reflected as a change in accounting principle.
• D)Should be considered as a non-recurring item,and shown,net of taxes,on the income statement.

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Definitions:

Simple Interest Rate

The percentage of interest calculated only on the principal amount, not including any interest from previous periods.

Investment

The allocation of resources (such as time, money, or effort) in the expectation of generating a future return or profit.

Interest

The expense associated with taking out a loan, usually conveyed as a yearly percentage of the total loan value.

Invested

Dispensing capital with the plan of creating income or profit.