Which of the Following Explanations Might Satisfy an Auditor Who

question 11

Multiple Choice

Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?

• A) Extraordinary repairs have lengthened the life of an asset.
• B) Prior years' depreciation charges were erroneously understated.
• C) A reserve for possible loss on retirement has been recorded.
• D) An asset has been recorded at its fair value.

---

Definitions:

Stockholder

An individual or entity that owns shares in a corporation's stock, giving them a claim on parts of the corporation’s assets and earnings.

Shares

Units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities; also known as shareholder's equity.

Cash Dividend

A distribution of a company's earnings to its shareholders as actual cash.