Which of the following explanations most likely would satisfy an auditor who que

Question

Which of the following explanations most likely would satisfy an auditor who questions management about significant debits to the accumulated depreciation accounts in the current year? Hint: accumulated depreciation has a natural credit balance.

a.        Prior years' depreciation expenses were erroneously understated.

b.       Current year's depreciation expense was erroneously understated.

c.        The estimated remaining useful lives of plant assets were revised upward.

d.       Fixed assets assets were retired and disposed during the current year.

Explanation / Answer

Choice "d" is correct. The explanation that plant assets were retired during the year would most likely satisfy an auditor who questions management about significant debits to accumulated depreciation accounts made during the year. The journal entry to retire an asset includes a debit to accumulated depreciation and a credit to the asset accoun

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