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:

Net New Borrowing

The difference between the total amount of debt a company takes on and the amount it repays within a specific period, indicating the net increase in debt.

Net Capital Spending

The total expenditure on fixed assets less any sales of fixed assets, measuring a company's investment in its physical assets.

Net Fixed Assets

The value of a company's property, plant, and equipment minus any depreciation, representing the company's long-term investments.

Operating Cash Flow

The cash generated from the normal operations of a business, indicative of the company's financial health.