Sure 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 amortization.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)an increase in amortization expense for the year in which the error is discovered.
B)a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements.
C)a gain for the year in which the error was made.
D)an adjustment to beginning retained earnings, net of tax.

Question

Quizplus · Accepted Answer

The correction of a material error from a prior period should be treated as a prior period adjustment, which involves adjusting the beginning retained earnings of the current year, net of tax.

Sure Corporation Made a Very Large Arithmetical Error in the Preparation