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

Question

Quizplus · Accepted Answer

A change in estimated useful life and residual value is a prospective change that only affects the current and future years, not past years. Therefore, choice A is incorrect. Choice C is also incorrect because there is no need for a cumulative adjustment since the change is only prospective.

A Change in the Estimated Useful Life and Residual Value