Question #21
Reading: Reading 12 Evaluating Quality of Financial Reports
PDF File: Reading 12 Evaluating Quality of Financial Reports.pdf
Page: 15
Status: Correct
Correct Answer: A
Question
Joe Carter, CFA, believes Triangle Equipment, a maker of large, specialized industrial equipment, has overstated the salvage value of its equipment. This would:
Answer Choices:
A. overstate earnings
B. understate earnings
Explanation
Overstating the salvage value reduces depreciation expense, which in turn increases
earnings.