North Ltd. purchased a building in 20X5 for $1,200,000. Straight-line depreciation was used, with a useful life of 40 years and a residual value of $200,000. A full year of depreciation was charged in 20X5. In 20X8, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 30%. Required: 1. Assume this is a change in estimate, and calculate 20X8 depreciation expense. Depreciation expense $112,500 2. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8 opening retained earnings. Depreciation expense $ 240,000
North Ltd. purchased a building in 20X5 for $1,200,000. Straight-line depreciation was used, with a useful life of 40 years and a residual value of $200,000. A full year of depreciation was charged in 20X5. In 20X8, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 30%. Required: 1. Assume this is a change in estimate, and calculate 20X8 depreciation expense. Depreciation expense $112,500 2. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8 opening retained earnings. Depreciation expense $ 240,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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