Which of the Following Is an Example of a Material

question 101

Multiple Choice

Which of the following is an example of a material accounting change that requires recognition in an unmodified opinion on the entity's financial statements?

• A)A change in the estimate of useful lives used to depreciate property, plant, and equipment.
• B)A change in the entity's form of reporting entity.
• C)Management has changed from one generally accepted accounting principle to another but has not provided reasonable justification.
• D)A change from an accounting principle that conforms with GAAP to one that does not.

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Definitions:

Accumulated Depreciation

Represents the total depreciation of a fixed asset over its life up to the current date.

Exchange of Assets

Transactions where one asset is traded for another, typically without the use of cash, within the scope of business activities.

Commercial Substance

A transaction's capability to change the future cash flows of a business in a way that is measurable.

Old Machine

A piece of equipment that has been in use for a significant period and may be near or beyond its expected useful life.