When Calculating Declining Balance Depreciation, the Straight-Line Rate Was Used

question 46

Multiple Choice

When calculating declining balance depreciation, the straight-line rate was used instead of double the straight-line rate. In the first year of ownership, this error would cause:

• A) the period's end assets to be overstated.
• B) the period's depreciation expense to be overstated.
• C) the period's end assets to be understated.
• D) None of these is correct.

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Definitions:

Annual End-Of-Year

A term typically referring to financial transactions or reports that are calculated, summarized, or finalized at the end of the fiscal year.

Journal Entries

Records of financial transactions in the accounting system, detailing the accounts affected and whether they are debits or credits.

Effective Interest Method

A method of calculating the interest rate on a bond that factors in the actual amount paid over the life of the bond, including any fees or costs.

Amortization Table

A table that outlines each periodic payment on a loan over time, breaking down the amounts that go towards the principal and interest.