The Company Uses Up $5,000 of the Book Value of an Existing

question 85

Multiple Choice

The company uses up $5,000 of the book value of an existing asset.The company adjusts its accounts accordingly.Which of the following is a true statement?

• A)This is an accrual adjustment.
• B)This is a closing adjustment.
• C)This is a deferral adjustment.
• D)The adjustment should not have been made.

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Definitions:

Incremental Borrowing Rate

The interest rate a company would have to pay if it borrows money to finance a lease or purchase.

Actuarial Information

Data and analysis provided by actuaries, concerning the evaluation of financial risks, especially those related to insurance and pensions, using mathematics, statistics, and financial theories.

Capital Lease

A lease agreement that is classified as a purchase by the lessee for accounting purposes, allowing the lessee to benefit from asset depreciation and interest expense deductions.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, often used in discounting cash flows.