10.5 Effects of Changes in Estimates on Depreciation ExpenseAt the end of each year, Patty Chu, the chief accountant at Rex Lin Enterprises, a Singapore-based trading company, reviews long-term assets at theend of each year to determine whether changes are called for in how these assets are depreciated. In December 2017, her attention focused on twoassets in particular:WarehouseBuildingDate acquired Cost Accumulated depreciation end of 2017 Useful life Residual value25 years$200,000$38,000$225,00040 years1,600,0001/1/131/1/12$10,000100,000Patty is proposing the following changes:For the warehouse: a decrease in the useful life to 20 years and a decrease in residual value to $6,000.For the building: an increase in the useful life to 50 years and a decrease in the residual value to $55,000.Before agreeing to the changes, Patty's bosses would like to know what the depreciation charges will be for each asset if the changes are adopted. Allassets are depreciated using the straight-line method.RequiredCalculate the revised annual depreciation expenses for each asset in 2018 and compare them to what the expenses would be if the changes were notmade.

Any change in the depreciation method or change in the assets like in the life of the asset or in…

Answered: Calculate the revised annual…

Calculate the revised annual depreciation expenses for each asset in 2018 and compare them to what the expenses would be if the changes were not made.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Calculate the balancing adjustment.

A: The initial allowance is an allowance given in the tax code for qualifying assets in the first year…

Q: An asset used in a 4-year project falls in the 5-year MACRS class (refer to MACRS table on page…

A: The objective of the question is to calculate the after-tax salvage value of an asset. The after-tax…

Q: The MACRS depreciation allowances on 3-year property are 33.33%, 44.45%, 14.81%, and 7.41%,…

A: Depreciation A method of allocation of net cost with respect to those periods in which an entity is…

Q: An asset used in a 4-year project falls in the 5 year MACRS class, for tax purposes. The asset has…

A: Salvage value net of tax is that amount which is received by the investor from selling the assets at…

Q: More than 10% of the taxable revenue can be deducted from maintenance and depreciation expenses.

A: Taxable revenue is the revenue which the company earns during the year which are subject to the tax…

Q: The period of time during which capitalization of interest begins and when capitalization of…

A: As per IFRS, Capitalization begins when the entity first meets all of the following conditions:––…

Q: Use the following data to answer Questions 16 to 30 On July 1, 2016, Tingting Manufacturing Limited…

A: The declining balance method computes the depreciation expense by applying the depreciation rate…

Q: Tom's business has a preliminary Schedule C income of $400,000 so she would fike to see if she can…

A: The deduction reduces the tax amount.

Q: Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in…

A: (a)

Q: Over what period of time should the cost of various typesof intangible assets be amortized by…

A: As per IAS 38, intangible assets are classified in finite and and infinite period asset, period here…

Q: A consulting company is buying a new computer system for their headquarters for $175,000. The asset…

A: New Computer Cost = $175,000 Asset Life = 5 Years

Q: Which of the following is NOT a method commonly used to determine the residual value of a property?

A: 1.d) Hire an appraiser to perform a forward-looking appraisal of the property This is not an…

Q: 3. As at 31 December 2020, the property had a fair value of €230,000. This property was previously…

A: (a) Journal entries for 3, 4 and 5 : 3. As on 31.12.2020, The property had fair value = E230000 Cost…

Q: The actual carrying of an asset is R650 000 on 1 Jan 2020. Depreciation for the 2020 Financial year…

A: Revaluation : The accounting method of increasing or decreasing the carrying value of a company's…

Q: Accumulated Acquisition Useful Depreciation to 12/31/19 Asset Category Number Description Date Life…

A: The following computations are done for recording depreciation journal entries for the assets of the…

Q: In 1998, Novak Company completed the construction of a building at a cost of $2.500,000 and first…

Q: You invest $7,500,000 in a commercial building that you place into service on 2/1/2023. How much can…

A: To calculate the depreciation deduction for a commercial building, you'll need to use the Modified…

Q: accumulated depreciation to date was 320,000 and depreciation expense for the present accounting…

A: Book value of assets = cost of an asset - depreciation.

Q: Calculate the depreciation expense by straight-line for 2020. (.

A: Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of…

Q: The depreciation charges for the year to 31 March 2021 are to be apportioned as follows: Cost of…

A: Allocation of Expenses = Expense can be allocated according the decided according the different…

Q: Suppose that a company purchases a computer to be used in the manufacturing department at the…

A: Depreciation under accelerated depreciation method for 2019: Depreciation…

Q: On January 1, 2019, Williams Company purchased a copy machine. The machine costs $160,000, its…

A: Depreciation Expenses - Depreciation Expenses are the expense incurred on the wear and tear of the…

Q: Sally Kremer purchased a computer for $9,120 on July 1, 2020. She intends to depreciate it over 4…

A: Assuming cost of asset = 100 % Depreciation per annum under Straight line method = 100%/4 years =…

Q: Monty Corp. purchased machinery for $495,000 on May 1, 2023. It is estimated that it will have a…

A: Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful…

Q: What is the depreciation expense of the equipment for 2023? what is the recoverable amount of the…

A: An asset is said to be impaired if carrying amount of an asset is higher than the recoverable…

Q: Hello, in the above question 3 on the change in policy on the depreciation why not calculate the…

A: Depreciation is the loss in the value of the asset caused due to its usage, wear and tear. There are…

Q: (f) The IASB's Conceptual Framework for Financial Reporting 2010 (IFRS Framework) requires financial…

A: IFRS or International Financial Reporting Standards are the guidelines of accounting given by the…

Q: The actual carrying of an asset is R650 000 on 1 January 2020. Depreciation for the 2020 Financial…

A: Depreciation is the lessening in the worth of asset due to asset's overuse, erosion or obsolescence.…

Q: How were the depreciation rate and the PV factor at 12% calculated? (the equations)

A: Depreciation rate for 3 year MACRS is provided in the table and is universally available.…

Q: Hi! Help me with this please. Thank you so much! _______ can be computed as the difference in…

A: Impairment word actually used in Medical field which indicates loss…

Q: Equipment was purchased at the beginning of 2019 for $870000. At the time of its purchase, the…

A: Yearly depreciation = Cost - Salvage valueEstimated useful life = $870,000 - $102,0006 years =…

Q: It is the annual interest investment + annual operation and maintenance + annual depreciation cost.

A: The annual interest investment, annual operation and maintenance and annual depreciation costs are…

Q: If the replacement cost of the machine on 31st December 2019 was OMR 70,000 and on 31st December…

A: Depreciation on historical cost of machine =Replacement cost of machine on 31st December , 2019×…

Q: An existing asset being considered for replacement has a current MV of $12,000 and a current BV of…

A: Capital Budgeting: Capital budgeting decisions are the most important decision in corporate…

Q: 31, 2020, and $55,375 at December 31, 2019. ired: there have not been any purchases, sales, or other…

A: Journal entries refers to the entries which are made at the end of the period or year and it records…

Q: Assume that an asset has a first cost of P94,158.00 and an expected salvage value of P15,613.00…

A: Depreciation - Depreciation Expense is incurred on the fixed assets of the company. It is charged to…

Q: Which of the following will cause a difference in book depreciation and federal depreciation?

A: The correct answer is: (C) Electing to take a Section 179 deduction on eligible property. Section…

Q: an item is capitalized why do you think different depreciation methods are allowed? Does the…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: An asset was place in the factory in the beginning of year 2018. It is expected to be used until end…

A: Double declining balance: Under double-declining balance method 200% of depreciation original…

Q: The Costanza Corporation purchased some equipment August 1, 2021 for $17,040 and expects to use it…

A: Formula: Straight line method depreciation = ( Asset cost - Salvage value ) / Useful life

Q: Suppose that Petrobras assumes a zero-salvage value for their "Equipment and other assets." For each…

Q: What are the depreciation allowances and book values for the SMP machine using MACRS depreciation…

A: Depreciation is the expense that incur due to the wear and tear of the fixed asset during its life…

Question

100%

10.5 Effects of Changes in Estimates on Depreciation Expense
At the end of each year, Patty Chu, the chief accountant at Rex Lin Enterprises, a Singapore-based trading company, reviews long-term assets at the
end of each year to determine whether changes are called for in how these assets are depreciated. In December 2017, her attention focused on two
assets in particular:
Warehouse
Building
Date acquired Cost Accumulated depreciation end of 2017 Useful life Residual value
25 years
$200,000
$38,000
$225,000
40 years
1,600,000
1/1/13
1/1/12
$10,000
100,000
Patty is proposing the following changes:
For the warehouse: a decrease in the useful life to 20 years and a decrease in residual value to $6,000.
For the building: an increase in the useful life to 50 years and a decrease in the residual value to $55,000.
Before agreeing to the changes, Patty's bosses would like to know what the depreciation charges will be for each asset if the changes are adopted. All
assets are depreciated using the straight-line method.
Required
Calculate the revised annual depreciation expenses for each asset in 2018 and compare them to what the expenses would be if the changes were not
made.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Computation of depreciation expenses

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

An asset with a purchase price of $501,013 falls in the 3-year MACRS asset class. The asset will be sold at the end of a three year project for $180,745. What is the book value of the asset at the end of the project? Round your answer to the nearest dollar. Year Depreciable Allowance 1 33% 2 45 3 15 4 7
For the following questions calculate the depreciation expense as noted in the space provided. Show detail in your answer so that the depreciation for 2019 and 2024 is clearly identified. Show detail in your answer. Rod paid $1,950,000 for a new warehouse on April 14, 2019. He sold the warehouse on September 29, 2024. Determine the cost recovery deduction for 2019 and 2024.
*attached is the problem REQUIRED: choose the letter What is the interest expense for 2020? a. 200,000b. 115,200c. 106,720d. 0 What is the depreciation for 2020? a. 135,200b. 115,200c. 67,600d. 20,000
An asset was acquired on January 1, 2020 for P800,000 and is expected to have a 5-year useful life. The straight-line method was used. On January 1, 2022, the asset was deemed to have a sound value of P720,000. How much is the revaluation surplus for the period ended December 31, 2022?
h
What is the effect of purchasing an asset one year but placing it in service the next year?
Use the information below to answer the questions that follow. The business's year-end is December 31. Cost of equipment = 120000 Useful life in years = 10 Residual value = 0 Date purchased = February 1, 2021 Date of disposal = October 31, 2023 Cash received on disposal = 85000 What is the accumulated depreciation on the date of the disposal? What is the book value of the equipment on the date of the disposal? What is the amount of the gain or loss on the disposal?
Urban infrastructures that support a community are sometimes in the news; we seldom think about them except when there is a disruption of service. A small city has just replaced a water storage tank and associated feeders from it throughout the community. It is estimated that the annual service requirements will be $40,000 the first year, with $10,000 increases in each subsequent year for 8 years. The community's time value of money is 4%.
Why do you think the 150% DB method is used as thebasis for depreciation for 15-year and 20-year classes ofequipment?