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AICPA CPA-Financial Exam - Topic 2 Question 66 Discussion
Topic #: 2
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants, made changes in accounting policies, corrected several errors dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List A represents possible clarifications of these transactions as: a change in accounting principle, a change in accounting estimate, a correction of an error in previously presented financial statements, or neither an accounting change nor an accounting error.
Item to Be Answered
Quo manufactures heavy equipment to customer specifications on a contract basis. On the basis that it is preferable, accounting for these long-term contracts was switched from the completed-contract method to the percentage-of-completion method.
List A (Select one)
Choice 'd' is correct. The concept of reliability in financial reporting includes; neutrality, representational faithfulness and verifiability.
Choices 'a', 'b', and 'c' are incorrect, per the above.
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