Grant Company Has Decided to Change the Estimate of the Useful

question 33

Multiple Choice

Grant Company has decided to change the estimate of the useful life of an asset that has been in service for 2 years.Which of the following statements describes the proper way to revise a useful life estimate?

• A)Revisions in useful life are permitted if approved by the IRS.
• B)Retroactive changes must be made to correct previously recorded depreciation.
• C)Only future years will be affected by the revision.
• D)Both the current and future years will be affected by the revision.

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Definitions:

Annual Interest

Annual interest is the amount of interest due over the course of a year on borrowed funds or invested capital.

Contract Rate

The agreed-upon rate specified in a contract for services or lending/borrowing, which could refer to interest rates or payment amounts for contractual services.

Bond

A debt security under which the issuer owes the holder a debt and is obliged to pay interest and/or to repay the principal at a later date.

Risk Level

The degree of uncertainty and/or potential financial loss inherent in an investment decision or policy.