A company made an error in calculating and reporting amortization expense in 2015.The error was discovered in 2016.The item should be reported as a prior period adjustment:
A)on the 2015 statement of retained earnings.
B)on the 2015 income statement.
C)on the 2016 statement of retained earnings.
D)on the 2016 income statement.
E)accounted for with a cumulative "catch-up" adjustment in 2016.

Question

Quizplus · Accepted Answer

The error was made in 2015, but discovered in 2016. Therefore, it should be reported as a prior period adjustment on the 2016 statement of retained earnings to correct the balance sheet at the end of 2015. It should not be corrected on the 2015 income statement, as that would affect the current year's income, nor should it be accounted for in a cumulative "catch-up" adjustment in 2016, as that would be misleading as to what occurred in the prior period.

A Company Made an Error in Calculating and Reporting Amortization