For the items listed below, indicate how each should be reported in the financial statements. Use the following letter code for your selections: a. Continuing operations b. Discontinued operations c. Prior period adjustment 1. The percentage of estimated bad debts was increased from 1% to 2%, thus increasing bad debt expense. 2. Obsolete inventory was written off. 3. Investments were sold for less than cost. 4. It was discovered that dividend revenue was inadvertently omitted from last year’s income statement. 5. The company sold one of its warehouses at a loss
For the items listed below, indicate how each should be reported in the financial statements. Use the following letter code for your selections: a. Continuing operations b. Discontinued operations c. Prior period adjustment 1. The percentage of estimated bad debts was increased from 1% to 2%, thus increasing bad debt expense. 2. Obsolete inventory was written off. 3. Investments were sold for less than cost. 4. It was discovered that dividend revenue was inadvertently omitted from last year’s income statement. 5. The company sold one of its warehouses at a loss
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
For the items listed below, indicate how each should be reported in the financial statements. Use the following letter code for your selections:
a. Continuing operations
b. Discontinued operations
c. Prior period adjustment
1. The percentage of estimated bad debts was increased from 1% to 2%, thus increasing bad debt expense.
2. Obsolete inventory was written off.
3. Investments were sold for less than cost.
4. It was discovered that dividend revenue was inadvertently omitted from last year’s income statement.
5. The company sold one of its warehouses at a loss.
6. Litigation with the federal government related to income taxes of three years ago was settled. The company is continually involved in various adjustments with the federal government related to its taxes.
7. A component of the business was disposed of at a loss.
8. The company neglected to record depreciation expense on some assets in the previous year.
9. All production in the United States was discontinued. The manufacturing operations were relocated to Vietnam.
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