The Service Life of a Building That Has Been Depreciated

question 54

Multiple Choice

The service life of a building that has been depreciated for 30 years of an originally estimated 50-year life (no residual value) has been revised to an estimated remaining life of 10 years. Based on this information, the accountant should

• A) continue to depreciate the building over the original 50-year life.
• B) depreciate the remaining book value over the remaining life of the asset.
• C) adjust accumulated depreciation to its appropriate balance through net income, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.
• D) adjust accumulated depreciation to its appropriate balance through retained earnings, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.

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Definitions:

Taxes Rise

Taxes rise refers to the increase in the required contributions by individuals or corporations to government revenues.

Laspeyres Price Index

a measure of the change in the cost of purchasing a fixed basket of goods and services, relative to the cost of the same basket in a base period.

Demand Function

A mathematical expression showing the relationship between the quantity demanded of a good and its price, along with other determinants like income and prices of related goods.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.