After the Julie Company issued its previous years’ financial statements, it noti

Question

After the Julie Company issued its previous years’ financial statements, it noticed that it incorrectly calculated depreciation expense and, thus, disclosed this fact as a prior period adjustment in its current years’ financial statements. (This difference also did not affect any cash balances, since Julie maintained an operating loss for both periods.) However, Julie did not issue comparative financial statements in the current year. Julie now wonders how to disclose this prior period adjustment in its current year’s Statement of Cash Flows.

Explanation / Answer

since it relates to prior period it requires a statement , is shall not be included in current net income since it relates to prior year.therefore Julie should state which financial statements are corrected , what kind of an error it was , prior period effect should be disclosed with its effect on retained earnings.

In statement of cash flow all non cash investing and financing activities that affect the said assets in this case should be disclosed, should clearly state the aspect of the transaction.

thus Julie should disclose and restate its financial statements.

since it relates to prior period it requires a statement , is shall not be included in current net income since it relates to prior year.therefore Julie should state which financial statements are corrected , what kind of an error it was , prior period effect should be disclosed with its effect on retained earnings.

In statement of cash flow all non cash investing and financing activities that affect the said assets in this case should be disclosed, should clearly state the aspect of the transaction.

thus Julie should disclose and restate its financial statements.

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