Which One of the Following Statements Is True

question 37

Multiple Choice

Which one of the following statements is true?

• A)Using straight-line depreciation for all newly acquired assets when double-declining-balance depreciation was used in the past does not require a cumulative-effect adjustment.
• B)An obvious error in recording depreciation expense in a prior year should be corrected by adjusting the current year's net income.
• C)A change from straight-line to sum-of-the-years'-digits depreciation should be handled prospectively.
• D)Changes in depreciation estimates are prior-period adjustments.

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Definitions:

Variable Component

The portion of costs or expenses that varies directly with changes in production volume or business activity.

Fixed Component

The portion of a cost or expense that remains constant regardless of the level of production or business activity.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders, based on a chosen activity base.

Variable Component

A portion of a cost or expense that varies directly with the level of activity or production volume.