26. McDonald Company acquired machinery on January 1, 2015 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 2020, McDonald estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by McDonald?A) By setting future annual depreciation equal to one-sixth of the book value on January 1, 2020B) By continuing to depreciate the machinery over the original fifteen year lifeC) As the cumulative effect of a change in accounting principle in 2020D) As a prior period adjustment

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Asked Dec 9, 2019
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26. McDonald Company acquired machinery on January 1, 2015 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 2020, McDonald estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by McDonald?

A) By setting future annual depreciation equal to one-sixth of the book value on January 1, 2020

B) By continuing to depreciate the machinery over the original fifteen year life

C) As the cumulative effect of a change in accounting principle in 2020

D) As a prior period adjustment

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Expert Answer

Step 1

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

Step 2

Identify the correct option for the given statement:

Indicate the manner in which the given change would be accounted for by McDonald.

The given change wo...

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