 In this presentation, we'll take a look at multiple choice questions related to property plant and equipment. First question. The straight-line depreciation method and the double-declining depreciation method A result in the same depreciation over the life of the asset, B result in the same accumulated depreciation each year, C result in the same book value each year, D result in the same depreciation expense each year, or E are the only legal method. Let's go through the scan using the process of elimination. The straight-line depreciation method and the double-declining balance depreciation method A result in the same depreciation over the life of the asset. Now that sounds pretty good actually because both methods at the end of the useful life should result in the same area. So let's see what else we have. B results in the same accumulated depreciation each year. And that will not typically be the case, we're typically going to have different depreciation each year, although we will end in the same book value the same result at the end of the time period. So it's not B, C says results in the same book value each year. And again, we're not going to get to the same book value because we're not going to have the same accumulated depreciation at the end of the time period. We will end up with that, but as we go through it won't have the same book value, which would be the cost minus the accumulated depreciation. D says results in the same depreciation expense each year. And again, it's not going to have the same depreciation expense either until at the end it will have all the depreciation for the entire time period will be the same, but not as we go through. And then E says are the only legal methods. And that's not necessarily true, there's other methods that we could use. For example, we might use, we might use units of production, and we could use tax methods if we choose to in many cases as well. So not necessarily the only legal method. So it looks like A is the answer. So once again, the straight line depreciation method and the double declining depreciation method A result in the same depreciation over the life of the asset. So at the end of the life will be at the same point. Next question. Method that allocates depreciation based on units produced A accumulated depreciation B declining balance depreciation C straight line depreciation D units of production E modified accelerated cost recovery method. So let's go through this one more time. Methods or at least one more time method that allocates depreciation based on units produced A accelerated depreciation. Now there might be an accelerated depreciation method that does that, but I don't think it's necessary that it's going to be based on units here. So but let's keep that for now. Next one says double declining balance depreciation declining balance depreciation. Most common would be the double declining. Now that doesn't typically involve units. We're still dealing with time here when using that method. So not typically B C says straight line depreciation. And again, the key here is units, we're not going to be using units with straight line. We'll be using time and then D says units of production depreciation. And if that's a real method, which I think it is, then it sounds pretty good because that word we're using units and the name of course, as the thing that we're going to be using in order to allocate depreciation. So that seems most appropriate so far. E says modified accelerated cost recovery system. That's going to be something that typically will be used in the tax code. But again, it usually uses time not units. So we're let's with A and D. So the question being method that allocates depreciation based on units produced either A accelerated depreciation or D units of production depreciation. And again, this accelerated, we don't have to use a units method typically will not. In other words, the declining balance here is an accelerated method and doesn't use units. So we're going to be using the D here, units of production depreciation. Next question. After depreciation expense has been estimated, A, it cannot be changed. B, it may be changed if laws change. C, any changes are recorded, asset is sold. I'm thinking that should be when asset is sold. D, the estimate itself cannot be changed. But new information must be disclosed in financial statements or E. It may be revised in later years based on new information. So if we go through this again with the process of elimination, after depreciation expense has been estimated, A, it cannot be changed. Now, if we look at the estimate, the problem with the estimate, of course, is that we're going to be recording depreciation over multiple years. And if we've already recorded depreciation in a few years, what happens if there's a change in the estimate after a few years and we still have a few years to go? Can we make a change? It would seem unreasonable, even if we were not sure, that we can't make any change based on the estimate. So I would think that that's probably not the case. B says it may be changed if laws change. And again, I'm thinking that law may not be the thing that changes because it's probably just the fact that we have some new information that would be better represented. If we can better represent the financial statements, you would think we should be allowed to do so under the current system. So I don't think that's it. So C says any changes are recognized, asset is sold. So it should be when the asset is sold. And that would be the case where we're going to make the adjustment at the point of time if we sell the asset. And again, we're not really representing the financial statements really fairly if we don't change the estimate in some way or make some adjustment if we have better information. So I don't think that we're probably going to wait till the end. D says the estimate itself cannot be changed, but new information must be disclosed in financial statement footnotes. Now that seems fairly reasonable to me because obviously we might say, we can't change it now because we've already been running on this estimate. And therefore, we'll just put a footnote in it saying, hey, we think we have a better estimate based on new information in the footnote and not make the change. So I'll leave that for now. E says it may be revised in later years based on new information. So if we didn't really know, I would think that these two would be the most reasonable type of choices. One, we're not going to make the change because D says we're not going to make the change because we already have been running on it, but we'll make a note of it. And E says we'll make a change in later years, meaning we're going to cut it off for this year. We're not going to revise the prior years. And we'll make the change here going forward. So if we read through this again, we're left with D and E. After depreciation expense has been estimated, D, the estimate itself cannot be changed, but new information must be disclosed in the financial statement footnotes. And E, it may be revised in later years based on new information. And actually E is typically going to be the correct answer. So if we made an adjustment in terms of the useful life, being extended or being less in later years, we're going to cut it off as of this point in time and then try to make a new projection based on what the book value is at the point in time we made the adjustment to the estimate.