A change in the estimated useful life and residual value of machinery in the current year is handled as: a. All of these answer choices are incorrect. b. A cumulative adjustment to income in the current year for the difference in depreciation under the new versus old estimates. c. A prospective change from the current year through the remainder of its useful life, using the new estimates. d. A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.

Question

Luciana Mckenzie

Business

8 April, 07:14

A change in the estimated useful life and residual value of machinery in the current year is handled as: a. All of these answer choices are incorrect. b. A cumulative adjustment to income in the current year for the difference in depreciation under the new versus old estimates. c. A prospective change from the current year through the remainder of its useful life, using the new estimates. d. A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.

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Answers (1)

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Jan Hampton · Answer 1

c. A prospective change from the current year through the remainder of its useful life, using the new estimates.

Explanation:

The company will recalculate the new depreciation expense for the equipment consider the new information available.

That is a prospective change, from this accountign period and forwards. The prior years depreciation expense and therefore, net income will not change.

That could only occur if we change the method of depreciation.

We aren't changin the method, we just acquire new information which wasn't available in other period so we don't adjust them.