Once the Estimated Depreciation Expense for an Asset Is Calculated

question 106

Multiple Choice

Once the estimated depreciation expense for an asset is calculated:

• A) The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes.
• B) Any changes are accumulated and recognized when the asset is sold.
• C) It may be revised based on new information.
• D) It cannot be changed, based on the historical cost principle.
• E) It cannot be changed, based on the consistency principle.

---

Definitions:

Note Duration

Note duration refers to the length of time until a financial note's principal and any accumulated interest are due to be repaid.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, typically noted on an annual basis.

Direct Write-off Method

An accounting practice where uncollectible accounts receivables are written off directly against income at the time they are deemed noncollectable.

Allowance Method

An accounting technique used to account for bad debts, which estimates and sets aside a portion of accounts receivable deemed unlikely to be collected.