Answered

IDNLearn.com makes it easy to find accurate answers to your specific questions. Join our interactive Q&A community and get reliable, detailed answers from experienced professionals across a variety of topics.

On January 1, Year 7, Colorado Corp. purchased a machine having an estimated useful life of 8 years and no salvage value. The machine was depreciated by the double-declining-balance (DDB) method for both financial statement and income tax reporting. On January 1, Year 9, Colorado justifiably changed to the straight-line method for both financial statement and income tax reporting. Accumulated depreciation at December 31, Year 8, was $525,000. If the straight-line method had been used, the accumulated depreciation at December 31, Year 8, would have been $300,000. The retroactive adjustment to the accumulated depreciation account on January 1, Year 9, as a result of the change in depreciation method is

Sagot :

Anthougoidn

Answer:

Colorado Corp.

The retroactive adjustment to the accumulated depreciation account on January 1, Year 9, as a result of the change in depreciation method is:

= $0.

Explanation:

a) Data and Calculations:

Accumulated depreciation at December 31, Year 8 based on double declining balance method = $525,000

Accumulated depreciation at December 31, Year 8 based on straight-line method = $300,000

The required adjustment to the accumulated depreciation account = $0 ($525,000 - $525,000)

b) The accumulated depreciation account does not require a retrospective adjustment.  It will remain at $525,000 while the company continues to apply the straight-line method going forward. The change is called a change in accounting estimate and not a change in accounting principle that requires retrospective application and adjustment to the previous years' accounts.

Thank you for contributing to our discussion. Don't forget to check back for new answers. Keep asking, answering, and sharing useful information. Discover insightful answers at IDNLearn.com. We appreciate your visit and look forward to assisting you again.