Once the Estimated Depreciation Expense for an Asset Is Calculated

question 43

Multiple Choice

Once the estimated depreciation expense for an asset is calculated:

• A)It cannot be changed.
• B)It may be revised based on new information.
• C)Any changes are accumulated and recognized when the asset is sold.
• D)The estimate itself cannot be changed; however,new information should be disclosed in financial statement footnotes.
• E)It can be changed only if U.S.tax law changes.

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Definitions:

Equity Method

An accounting technique used to record investments in which the investor has significant influence over the investee, usually through ownership of 20-50% of voting stock.

Bonds Payable

Long-term liabilities represented by promissory notes issued by a company to borrow funds, repayable at a specified future date along with interest.

Unamortized Discount

The portion of a bond's issue price that is below its face value and has not yet been expensed over the life of the bond.

Straight-Line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.