The company uses up $5,000 of the book value of an existing asset.The company adjusts its accounts accordingly.Which of the following is a true statement?
A)This is an accrual adjustment.
B)This is a closing adjustment.
C)This is a deferral adjustment.
D)The adjustment should not have been made.

Question

Quizplus · Accepted Answer

This is a deferral adjustment because the company is decreasing the book value (an asset account) by $5,000 after it has been used up. This means that the asset was not fully utilized in the previous accounting period and needs to be adjusted accordingly.

The Company Uses Up $5,000 of the Book Value of an Existing