When the Purchase of a Material Seven-Year Depreciable Asset Is

question 92

Multiple Choice

When the purchase of a material seven-year depreciable asset is recorded by debiting an expense account, which one of the following statements is correct?

• A) It is a self-correcting error and no adjustment is necessary.
• B) The error will eventually self-correct, but the financial statements will be in error for seven years.
• C) If the company uses a rapid depreciation method, the error will self-correct quickly so no adjustment is necessary.
• D) Since it affects only the income statement, no adjustment is required.

---

Definitions:

Budgeting

The process of creating a financial plan or forecast for a specific period, detailing expected revenues and expenditures.

Employee Salaries

Fixed payments made to employees for their services over a specified period, typically monthly or bi-monthly.

Budgeting

The process of creating a financial plan to manage revenue and expenses for a specific period, often key to strategic planning in businesses and personal finance management.

Activity Variance

The difference between the budgeted amount of an activity and the actual amount incurred.