A21-8 Change in Estimated Useful Life (LO 21-1, 21-6, 21-8) Stacey Corp. has been depreciating equipment over a 10-year life on a straight-line basis. The equipment, which cost $28,600, was purchased on 1 January 20X1. It has an estimated residual value of $7,600. On the basis of experience since acquisition, management has decided in 20X5 to depreciate it over a total life of 14 years instead of 10 years, with no change in the estimated residual value. The change is to be effective on 1 January 20X5. The 20X5 financial statements are prepared on a comparative basis; 20X4 and 20X5 incomes before depreciation were $54,100 and $56,400, respectively. Disregard income tax considerations. 3. Show how the accounting change, the equipment, and the related depreciation should be reported on the 20X5 financial statements, including comparative 20X4 results. Comparative SFP, 31 December: Equipment Accumulated depreciation Net book value Comparative SCI for year: Earnings prior to depreciation and tax Depreciation expense Earnings before tax 20X5 20X4 $ 0 $ $ 0 $ 0
A21-8 Change in Estimated Useful Life (LO 21-1, 21-6, 21-8) Stacey Corp. has been depreciating equipment over a 10-year life on a straight-line basis. The equipment, which cost $28,600, was purchased on 1 January 20X1. It has an estimated residual value of $7,600. On the basis of experience since acquisition, management has decided in 20X5 to depreciate it over a total life of 14 years instead of 10 years, with no change in the estimated residual value. The change is to be effective on 1 January 20X5. The 20X5 financial statements are prepared on a comparative basis; 20X4 and 20X5 incomes before depreciation were $54,100 and $56,400, respectively. Disregard income tax considerations. 3. Show how the accounting change, the equipment, and the related depreciation should be reported on the 20X5 financial statements, including comparative 20X4 results. Comparative SFP, 31 December: Equipment Accumulated depreciation Net book value Comparative SCI for year: Earnings prior to depreciation and tax Depreciation expense Earnings before tax 20X5 20X4 $ 0 $ $ 0 $ 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gadubhai
Transcribed Image Text:A21-8 Change in Estimated Useful Life (LO 21-1, 21-6, 21-8)
Stacey Corp. has been depreciating equipment over a 10-year life on a straight-line basis. The equipment, which cost $28,600, was
purchased on 1 January 20X1. It has an estimated residual value of $7,600. On the basis of experience since acquisition, management
has decided in 20X5 to depreciate it over a total life of 14 years instead of 10 years, with no change in the estimated residual value.
The change is to be effective on 1 January 20X5. The 20X5 financial statements are prepared on a comparative basis; 20X4 and 20X5
incomes before depreciation were $54,100 and $56,400, respectively. Disregard income tax considerations.
3. Show how the accounting change, the equipment, and the related depreciation should be reported on the 20X5 financial
statements, including comparative 20X4 results.
Comparative SFP, 31 December:
Equipment
Accumulated depreciation
Net book value
Comparative SCI for year:
Earnings prior to depreciation and tax
Depreciation expense
Earnings before tax
20X5
20X4
$
0 $
$
0
$
0
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