In its December 31, 2009 financial statements, E-Z Prices estimated that losses on its current receivables would be $10.2 million. During 2010, E-Z Prices determined that the losses on the Dec. 31, 2009, receivables were actually $12.4 million. Ignoring taxes, E-Z Prices would report, in its 2010 financial statements, the additional $2.2 million loss on receivables as:
A)An extraordinary item.
B)A prior period adjustment.
C)A retroactive adjustment.
D)A current year's expense.

Question

Quizplus · Accepted Answer

The additional $2.2 million loss on receivables would be reported as a current year's expense because it reflects an adjustment to the estimate of losses on receivables made in the previous year.

In Its December 31, 2009 Financial Statements, E-Z Prices Estimated