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If a company makes a prior period adjustment, which of the following describes how it must be reported? 1.The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are not changed   2.The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are adjusted.   3.The adjustment is recorded as a deferred asset or deferred liability and amortized using the straight-line method.   4.The adjustment is reported in the current period's income statement as a separate item.

If a company makes a prior period adjustment, which of the following describes how it must be reported? 1.The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are not changed   2.The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are adjusted.   3.The adjustment is recorded as a deferred asset or deferred liability and amortized using the straight-line method.   4.The adjustment is reported in the current period's income statement as a separate item.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
Problem 2MC: A prior period adjustment should be reflected, net of applicable income taxes, in the financial...
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If a company makes a prior period adjustment, which of the following describes how it must be reported?

1.The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are not changed
 
2.The adjustment is recorded in retained earnings, and previous years' financial statements presented for comparative purposes are adjusted.
 
3.The adjustment is recorded as a deferred asset or deferred liability and amortized using the straight-line method.
 
4.The adjustment is reported in the current period's income statement as a separate item.
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