On December 31, 2012, the Adjusting Entry for Depreciation Was

question 76

Multiple Choice

On December 31, 2012, the adjusting entry for depreciation was made incorrectly. The following is the entry which was made erroneously: The correct amount of depreciation should have been $5,100. Consider the effects of this error on the balance sheet, and identify which of the following statements is TRUE.

• A)Total liabilities are overstated by $3,600.
• B)Total liabilities are understated by $3,600.
• C)Total assets are overstated by $3,600.
• D)Total assets are understated by $3,600.

Understand the concept of salvage value and its role in computing depreciation.

Recognize the importance of matching the depreciation method with the asset's use and its contribution to revenue over its useful life.

Calculate the total cost of acquiring plant assets, including additional expenses.

Distinguish between the costs that are capitalized and those that are expensed when incurred.

---

Definitions:

1933 Act

The Securities Act of 1933, a U.S. law aimed at ensuring more transparency in financial statements so investors can make informed decisions about securities investments.

Regulatory Components

Elements or aspects of laws, regulations, or guidelines that impact how businesses and individuals must conduct themselves.

Registration Provisions

Legal requirements for the recording or listing of an item, transaction, or entity with a designated authority to make it legally recognizable and/or to regulate it.

Rule 163

Without a specific context, this refers to a regulatory or procedural guideline within a particular legal, financial, or institutional framework that may differ significantly in content across contexts.