Staff Accounting Bulletin (SAB) No. 108 articulates guidance on applying

16-49  LO 3 Staff Accounting Bulletin (SAB) No. 108 articulates guidance on applying the dual approach to evaluating uncorrected misstate- ments. Under the dual approach, a misstatement must be   corrected if it is material (using guidelines established in SAB No. 99) under either the rollover method or the iron curtain method. Assume   that a liability is overstated by $100 because a $20  misstatement occurred in each year of a five-year period ending in the current period. Also assume that materiality for the income statement is View complete question » 16-49      LO 3 Staff Accounting Bulletin (SAB) No. 108 articulates  guidance on applying the dual approach to evaluating uncorrected misstate- ments. Under the dual approach, a misstatement must be   corrected if it is material (using guidelines established in SAB No. 99) under either the rollover method or the iron curtain method. Assume   that a liability is overstated by $100 because a $20  misstatement occurred in each year of a five-year period ending in the current period. Also assume that materiality for the income statement is $50 and materiality for the balance sheet is   $75. a.       What is the current-year effect of the error under (a) the roll- over method and (b) the iron curtain method? b.       What adjustment do you recommend for this year? Explain the rationale for your proposed adjustment.


 

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