Asuncion Company Purchased Some Equipment on January 2,2011,for $24,000

question 40

Multiple Choice

Asuncion Company purchased some equipment on January 2,2011,for $24,000.The company used straight-line depreciation based on a ten-year estimated life with no residual value.During 2014,management decided that this equipment could be used only three more years and then would be replaced with a technologically superior model.What entry should the company make as of January 1,2014,to reflect this change?

• A) No entry
• B) Debit a Prior Period Adjustment account for $4,800 and credit accumulated depreciation for $4,800.
• C) Debit Retained Earnings for $4,800 and credit accumulated depreciation for $4,800.
• D) Debit Depreciation Expense for $4,800 and credit Accumulated Depreciation for $4,800.

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Definitions:

Average Market Price

The mean price at which a commodity or security is traded over a certain period, reflecting buyers' and sellers' consensus value.

Treasury Stock

Shares that were once a part of the outstanding shares but were bought back by the issuing company, reducing the amount of outstanding stock on the open market.

Paid-In Capital

The total amount of money or value of property that shareholders have contributed to a company in exchange for shares, excluding earnings retained by the company.

Journalize

The process of recording transactions in a journal before they are posted to ledger accounts.