When Estimates of Useful Life and Residual Value Made for the Purposes

question 4

Multiple Choice

When estimates of useful life and residual value made for the purposes of calculating depreciation,in later years turn out to be materially incorrect and the asset has not reached the end of its useful life,the procedure to be followed is to:

• A)Issue corrected financial statements for all prior years
• B)Issue corrected financial statements for only the most recent three years
• C)Ignore the problem since estimates are not expected to be exact anyway
• D)Spread the remaining depreciable amount over the remaining useful life

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Definitions:

Economic Efficiency

A state in which resources are allocated in a way that maximizes the total benefits received by all individuals in an economy.

Benefits

Advantages or payments made to individuals or employees, which can include health insurance, retirement plans, and other perks beyond basic salaries.

Costs

The expenses incurred in the process of producing or providing goods and services.

Efficiency Standpoint

A perspective from which actions are evaluated based on their ability to achieve the highest output with the least waste of resources.