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:

Government Intervention

Actions taken by a government to influence or regulate the economy or specific industries, often to correct market failures or promote social welfare.

Equilibrium Quantity

The quantity of goods or services supplied that is equal to the quantity demanded at the market equilibrium price.

Government Intervention

Actions taken by a government to affect the economy, which can include regulations, subsidies, tariffs, and other forms of involvement.

Market Efficiency

A condition in which all available information is fully reflected in asset prices, making it impossible to consistently achieve higher returns than the overall market.