Elder Corporation decided to change its depreciation policy by (1)changing from double-declining-balance depreciation,and (2)changing the estimated useful life on all automobiles used in the business from five years to four years. Which of the following is correct concerning these two changes?
A) Both are changes in accounting principle.
B) Both are changes in accounting estimate.
C) One is an error correction,and one is change in accounting principle.
D) One is a change in estimate effected through a change in accounting principle,and one is a change in estimate.

Question

Quizplus · Accepted Answer

The first change, from double-declining-balance depreciation, is a change in accounting principle. The second change, from a useful life of five years to four years, is a change in estimate. Therefore, this situation involves a change in estimate that is being effected through a change in accounting principle (option D).

Elder Corporation Decided to Change Its Depreciation Policy by (1)changing