For a Company Using the Straight-Line Method of Depreciation That

question 9

Multiple Choice

For a company using the straight-line method of depreciation that changes the estimated useful life from 20 years to 15 years as at the beginning of the year, the accountant should do (or not do) the following:

• A)Compute current year depreciation as (carrying amount - residual value)divided by 20 years.
• B)Adjust prior year's depreciation.
• C)Do not adjust the amount of accumulated depreciation as at the beginning of the year.
• D)Compute current year depreciation as (carrying amount)× 15/20.

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Definitions:

Fixed Input(s)

Factors of production, such as land or machinery, that cannot be adjusted in the short term.

Short Run

A time period during which at least one input is fixed and cannot be adjusted by a firm.

Diseconomies Of Scale

Occur when a company grows so large that the costs per unit increase. It is the opposite of economies of scale.

Long-Run Average Total Cost Curve

A graphical representation showing the lowest possible cost at which any given level of output can be produced in the long run.