Accounting chapter 4

Which one of the following types of losses is excluded from the determination of net income in income statements?

Material losses resulting from correction of errors related to prior periods.

Which of the following is an example of managing earnings down?

Revising the estimated life of equipment from 10 years to 8 years.

Which of the following is an example of managing earnings up?

Underestimating warranty claims.

Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as

a prior period adjustment.

The occurrence that most likely would have no effect on 2017 net income is the

correction of an error in the financial statements of a prior period discovered subsequent to their issuance.