IDNLearn.com is your go-to resource for finding answers to any question you have. Ask anything and receive thorough, reliable answers from our community of experienced professionals.

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 :

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.

We value your participation in this forum. Keep exploring, asking questions, and sharing your insights with the community. Together, we can find the best solutions. IDNLearn.com has the solutions you’re looking for. Thanks for visiting, and see you next time for more reliable information.