Which of the Following Is TRUE When the Estimate of an Asset's

question 7

Multiple Choice

Which of the following is TRUE when the estimate of an asset's useful life is changed?

• A) The new estimate is ignored until the last year of the asset's life.
• B) The depreciation expense in the prior years are restated.
• C) Prior years' financial statements must be restated.
• D) The asset's remaining depreciable book value will be spread over the asset's remaining life.

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Definitions:

Sales Revenue

The earnings obtained through the sale of products or services during a certain timeframe.

Inventories

Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services.

Insurance Policy

A contract between an insurer and a policyholder that outlines the terms and conditions under which the insurer agrees to compensate the policyholder for losses under specified circumstances.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to the shareholders, often reinvested in the business or used to pay off debt.