A Change in the Estimated Useful Life of a Building

question 64

Multiple Choice

A change in the estimated useful life of a building

• A) is not allowed by generally accepted accounting principles.
• B) affects the depreciation on the building beginning with the year of the change.
• C) must be handled as a retroactive adjustment to all accounts affected,back to the year of the acquisition of the building.
• D) creates a new account to be recognized on the income statement reflecting the difference in net income up to the beginning of the year of the change.

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Definitions:

Operating Assets

Assets used in the day-to-day operations of a business to generate income.

Net Operating Income

A company's operating profit after subtracting operating expenses from gross profit, excluding taxes and interest payments.

Reduction In Expenses

Actions or strategies implemented by an organization aimed at decreasing its total costs or expenditures to improve profitability.

Residual Income

Represents the amount of income that an investment generates above the minimum rate of return.