Depreciation accounting involves the use of estimates.

Depreciation accounting involves the use of estimates. At the time an asset is retired or sold, however, many of the factors affecting the annual cost of using the asset become known. For each of the following errors in estimation, indicate whether the accounting entries at the time of retirement would show a gain or loss:

a. Estimated useful life shorter than actual.

b. Estimated salvage value higher than actual.

c. Estimated removal costs lower than actual.

d. Estimated useful life longer than actual.

e. Estimated salvage value lower than actual.

 

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