Financial Accounting Discussion Questions.
- In the fourth year of an asset’s 5-year useful life, the company decides that the asset will have a 6-year service life. How should the revision of depreciation be recorded? Why?
- In a recent newspaper release, the president of Keene Company asserted that something has to be done about depreciation. The president said, “Depreciation does not come close to accumulating the cash needed to replace the asset at the end of its useful life.”
What is your response to the president?
DQ 2 — More About Long Term Liabilities
- In general, what are the requirements for the financial statement presentation of long-term liabilities?
- As a source of long-term financing, what are the major advantages of bonds over common stock? What are the major disadvantages in using bonds for long-term financing?
There is a need to understand that revision of depreciation is not an accounting error. It occurs often and accountants have found a way to incorporate it into accounting books. The company does not have to adjust its prior accounting records, all what is done is to divide the remaining book value less the salvage……….