Creighton,Inc

question 139

Multiple Choice

Creighton,Inc.determined that it had incorrectly estimated both the useful life and the estimated residual value of equipment that it purchased two years ago.When accounting for the change in its accounting estimates,Creighton must

• A)correct the financial statements of prior years affected by the errors in the estimates.
• B)determine the book value at the point of change and depreciate that amount over the remaining useful life.
• C)add the amount of the error to the amount of the current year's depreciation expense.
• D)determine the effect of the error and report it as a loss on the income statement in Other Revenues and Expenses.

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Definitions:

Break-Even

The moment when total expenditures coincide with total income, ensuring there is no financial loss or gain.

Monthly Dollar Sales

The total revenue generated from sales of goods or services within a specific month, expressed in dollars.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.

Break-Even

The point where total costs equal total revenues, indicating no profit or loss.