Which of the Following Explanations Most Likely Would Satisfy an Auditor

question 70

Multiple Choice

Which of the following explanations most likely would satisfy an auditor who questions management about significant debits to the accumulated depreciation accounts?

• A) The estimated remaining useful lives of plant assets were revised upward.
• B) Plant assets were retired during the year.
• C) The prior year's depreciation expense was erroneously understated.
• D) Overhead allocations were revised at year-end.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the product.

Collections

The process of receiving payments from customers or clients for goods or services rendered.

Merchandise Purchases

The total cost of goods bought for resale during a specific period in a retail or wholesale business.

Cost of Goods Sold

The total cost of manufacturing and delivering a product to the customer, including raw materials, labor, and overhead.