Which of the following is typically associated with cookie jar reserves?
A) Purchased in-process research and development
B) Recognizing very high bad debt expense when earnings are high
C) Recognizing revenue when a contract is signed prior to delivery of goods or performance of services
D) Proforma earnings

Question

Quizplus · Accepted Answer

Cookie jar reserves are a form of earnings management, where a company intentionally sets aside excess reserves during good times in order to smooth out earnings and use them during bad times. One way to create excess reserves is by recognizing very high bad debt expenses when earnings are high, thereby creating a reserve for future write-offs.

Which of the Following Is Typically Associated with Cookie Jar