Changing Circumstances May Require a Change in the Useful Life

question 57

Multiple Choice

Changing circumstances may require a change in the useful life of an asset. When this occurs, it involves a change in

• A) accounting estimate rather than a change in accounting principle.
• B) accounting principle rather than a change in accounting estimate.
• C) both accounting principle and accounting estimate.
• D) neither accounting principle nor accounting estimate.

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Definitions:

Annuity Due

A type of annuity payment where payments are made at the beginning of each period instead of the end.

Growing Perpetuity

A series of cash flows that grow at a consistent rate indefinitely.

Growing Annuity

A series of periodic payments that grow at a constant rate and are received for a finite number of periods.

Perpetuity

A type of annuity that pays a fixed amount of money to an investor at regular intervals indefinitely.