A company made an error in calculating and reporting depreciation expense in 2013.The error was discovered in 2014.The item should be reported as a prior period adjustment:
A)on the 2013 statement of retained earnings.
B)on the 2013 income statement.
C)on the 2014 statement of retained earnings.
D)on the 2014 income statement.
E)accounted for with a cumulative "catch-up" adjustment.

Question

Quizplus · Accepted Answer

The error was made and should have been corrected in 2013, but was discovered in 2014. Therefore, it should be reported as a prior period adjustment on the 2014 statement of retained earnings. It should not be reported on the 2013 income statement as that would indicate it was corrected in 2013. The cumulative "catch-up" adjustment method is a possible way to correct prior period errors, but it doesn't answer the question of where it should be reported.

A Company Made an Error in Calculating and Reporting Depreciation