객관식
Which of the following may lead to a revision of an estimate of a company's depreciation expense?
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8. Long Lived Assets
Change in Estimate: Depreciation
객관식
Changing Minds Company purchased a building for \$480,000 and depreciated on a straight-line basis over 40 years, estimating a residual value of \$60,000. The company depreciated the building for twenty years and then estimated that the building would only remain useful for another twelve years. At this time, the company also re-evaluated the residual value at \$30,000. What will be depreciation expense in year 21?
A
\$15,000
B
\$17,500
C
\$20,000
D
\$21,000
E
None of the above
검증된 단계별 안내1
Calculate the original annual depreciation expense using the straight-line method. The formula is: (Cost - Residual Value) / Useful Life. Initially, this is (\$480,000 - \$60,000) / 40 years.
Determine the accumulated depreciation after 20 years by multiplying the original annual depreciation expense by 20.
Calculate the book value of the building at the end of year 20 by subtracting the accumulated depreciation from the original cost of the building.
Reassess the remaining useful life and residual value. The new useful life is 12 years, and the new residual value is \$30,000.
Compute the new annual depreciation expense for year 21 and onwards using the formula: (Book Value at end of year 20 - New Residual Value) / New Useful Life. This will give you the depreciation expense for year 21.
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