If the Estimated Useful Life of an Asset Was Originally

question 28

Multiple Choice

If the estimated useful life of an asset was originally 10 years and then later changed to 12 years, the effects of this change should be:

• A)Reported and recorded retrospectively, including pro forma financial statements in the year of change.
• B)Spread over the current and future periods.
• C)Recorded in an adjustment to the Accumulated Depreciation account and the Retained Earnings account in the year of change.
• D)Reported as a special item on the income statement in the year it occurs.

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Definitions:

Money Demand Curve

A visual depiction illustrating the connection between how much money individuals wish to retain and the rate of interest.

Interest Rate

The percentage charged on the total amount borrowed or paid on deposited funds over a specific time period.

Liquid Assets

Assets that can quickly and easily be converted into cash without significant loss in value.

Interest Rate

The percentage of a loan that is applied as interest for the borrower, usually expressed as an annual rate of the remaining loan balance.