The Auditor Is Examining the Accounting Entries Made to the Accumulated

question 14

Multiple Choice

The auditor is examining the accounting entries made to the accumulated depreciation account during the year and notices a significant amount of debits to the account.Which of the following provides the most logical explanation?

• A)Large number of asset retirements
• B)Salvage values were revised downward
• C)Useful lives were revised downward
• D)Allocation of fixed overhead were revised

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Definitions:

Capacity

The maximum level of output that a company can sustain to produce in a given period under normal circumstances.

Machine-Hours

Machine-hours refer to the total time that machinery is in operation, often used as a basis for allocating manufacturing overhead costs.

Unused Capacity

The portion of a company's production capability or resources that is not currently being utilized to generate revenue or output.

Predetermined Overhead Rate

A rate calculated before a production period based on estimated overhead costs and activity levels, used to allocate overhead costs to products.