9th Edition

ISBN: 9781260216141

Author: SPICELAND

Publisher: MCG CUSTOM

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The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating exp…

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset…

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Textbook Question

Chapter 20, Problem 20.17E

Change in estimate; useful life and residual value of equipment

• LO20–4

Wardell Company purchased a mini computer on January 1, 2016, at a cost of $40,000. The computer has been depreciated using the straight-line method over an estimated five-year useful life with an estimated residual value of $4,000. On January 1, 2018, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $900.

Required:

1. Prepare the appropriate adjusting entry for depreciation in 2018 to reflect the revised estimate.

2. Repeat requirement 1, assuming that the company uses the sum-of-the-years’-digits method instead of the straight-line method.

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Chapter 20, Problem 20.16E

Chapter 20, Problem 20.18E

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Chapter 20 Solutions

INTERMEDIATE ACCOUNTING(LL)-W/CONNECT

Ch. 20 - Prob. 20.1Q Ch. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3Q Ch. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8Q Ch. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...

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Solution Summary: The author explains that changes in accounting estimates are accounted with immediate effect in the financial statements of the company.

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