The Method of Depreciation Was Changed from the Double-Declining-Balance Method

question 104

Multiple Choice

The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2019.A machine was purchased on January 1,2017,at a cost of $150,000.The machine has an estimated useful life of 10 years and a residual value of $9,000.What is the appropriate accounting?

• A)Retrospective adjustment for fiscal 2019.
• B)Retrospective adjustment for fiscal 2017 and 2018.
• C)Prospective adjustment from fiscal 2018 going forward.
• D)Error correction for fiscal 2019.

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Definitions:

Acid-Test Ratio

A financial metric that measures a company's ability to pay its short-term liabilities with its most liquid assets, excluding inventory.

Current Assets

Assets that a company expects to convert into cash, sell, or consume within one year or within the operating cycle, including cash, inventory, and accounts receivable.

Accounts Receivable Turnover

A financial ratio that measures how many times a company collects its average accounts receivable in a period.

Allowance for Bad Debts

A financial accounting technique to estimate and offset the amount of receivables that may not be collected.