Changes in the Estimates for Residual Value or Useful Life

question 51

Multiple Choice

Changes in the estimates for residual value or useful life result in changes in the depreciation expense calculation.These changes are handled

• A)retroactively.
• B)as cumulative changes.
• C)prospectively.
• D)as prior period adjustments.

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Definitions:

Nominal Rate of Return

The rate of return on an investment without adjusting for inflation.

Real Future Value

The measure of the future value of an investment or stream of cash flows, adjusted for inflation, to reflect the actual purchasing power of that future amount.

Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Deposit Insurance

Deposit Insurance is a protection scheme for bank depositors that guarantees the safety of deposits in member banks, up to a certain limit, in the event of a bank failure.