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:

Overhead Costs

Expenses related to the day-to-day running of a business that cannot be directly linked to any specific business activity or product.

Departments

Divisions within an organization, each focusing on a specific area of function, such as sales or human resources.

Products

Products are items or services created through a process and made available for consumer purchase or use, serving identified market needs or desires.

Production Department

A unit or section within a company responsible for the actual production of goods or services.