Discuss the necessity to revise the estimated life of a plant asset and discuss whether it affects the amount of depreciation per year and also discuss the reason behind it.

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Chapter 6, Problem 23Q

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Discuss the necessity to revise the estimated life of a plant asset and discuss whether it affects the amount of depreciation per year and also discuss the reason behind it.

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Assets Martinez Company Comparative Balance Sheets December 31 2025 2024 Cash $91,000 $52,000 Accounts receivable 52,000 36,400 Inventory 72,800 52,000 Property, plant, and equipment 156,000 202,800 Accumulated depreciation Total (83,200) [62,400) $288,600 $290,800 Liabilities and Stockholders' Equity Accounts payable $49,400 $ 39,000 Income taxes payable 18,200 20,800 Bonds payable 44,200 85,800 Common stock 46,900 36,400 Retained earnings 130,000 98,800 Total $288,600 $280,800 Martinez Company Income Statement For the Year Ended December 31, 2025 Sales revenue $629,200 Cost of goods sold 455,000 Gross profit 174,200 Selling expenses $46,800 Administrative expenses 15,600 62,400 Income from operations 111,800 Interest expense 7,800 Income before income taxes 104,000 Income tax expense 20,800 Net income $83,200 Additional data: 1. Depreciation expense was $45,500. 2. Dividends declared and paid were $52,000. 3. During the year, equipment was sold for $22,100 cash. This equipment…

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