Kardashian Ltd. purchased a building in Oshawa in 20X5 for $1,500,000. Straight line depreciation was used, with a useful life of 40 years and a residual value of $300,000. A full year of depreciation was charged in 20X5, In 20X8, the company decided to switch the depreciation method to declining balance, using a rate of 10%. The tax rate is 25%. Required: (a) Assuming that this is a change in estimate, calculate the 20X8 depreciation expense. (b) Assuming that this is a change in policy, calculate the 20X8 depreciation expense and the cumulative effect of the change on the 20X8 opening retained earnings. (c) Under what circumstances would a change in depreciation method be considered a change in estimate?
Kardashian Ltd. purchased a building in Oshawa in 20X5 for $1,500,000.
Straight line
In 20X8, the company decided to switch the depreciation method to declining balance, using a rate of 10%.
The tax rate is 25%.
Required:
(a) Assuming that this is a change in estimate, calculate the 20X8 depreciation expense.
(b) Assuming that this is a change in policy, calculate the 20X8 depreciation expense and the cumulative effect of the change on the 20X8 opening
(c) Under what circumstances would a change in depreciation method be considered a change in estimate?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
