Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 4 - Using Your Judgment - Financial Statement Analysis Case - Instructions - Page 201: a

Answer

Estimates and assumptions affiliated with items such as warranties, bad debt expense, residual values, or useful lives for fixed assets can easily result in overstated income.

Work Step by Step

For instance, an asset with a short useful life means that the rate of depreciation is quite high, and assuming a long useful life on such an asset can result in income being overstated.
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