When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should (a) Retrospectively change the depreciation charge based on the revised salvage value. (b) Change the depreciation charge and treat it as a correction of an error. (c) Change the annual depreciation for the current year and future years. (d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.
When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should (a) Retrospectively change the depreciation charge based on the revised salvage value. (b) Change the depreciation charge and treat it as a correction of an error. (c) Change the annual depreciation for the current year and future years. (d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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When an independent valuation expert advises an entity that the salvage value of its plant and machinery
had drastically changed and thus the change is material, the entity should
(a) Retrospectively change the depreciation charge based on the revised salvage value.
(b) Change the depreciation charge and treat it as a correction of an error.
(c) Change the annual depreciation for the current year and future years.
(d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.
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