Problem 8-12 (IAA) On January 1, 2021, Canyon Company decided to decrease the estimated useful life of the patent from 10 years to 8 years. The patent was purchased on January 1, 2016 for P3,000,000 with estimated residual value of zero. The entity decided on January 1, 2021 to change the depreciation method from accelerated method to straight line. On January 1, 2021, the cost of the equipment is P8,000,000 and the accumulated depreciation is P3,400,000. The remaining useful life of the equipment on January 1, 2021 is 10 years and the residual value is P200.000. What amount should be recorded as total charge against 2021 income as a result of the accounting changes? a. 940,000 b. 960,000 c. 627,500 d. 647,500

Problem 8-12 (IAA) On January 1, 2021, Canyon Company decided to decrease the estimated useful life of the patent from 10 years to 8 years. The patent was purchased on January 1, 2016 for P3,000,000 with estimated residual value of zero. The entity decided on January 1, 2021 to change the depreciation method from accelerated method to straight line. On January 1, 2021, the cost of the equipment is P8,000,000 and the accumulated depreciation is P3,400,000. The remaining useful life of the equipment on January 1, 2021 is 10 years and the residual value is P200.000. What amount should be recorded as total charge against 2021 income as a result of the accounting changes? a. 940,000 b. 960,000 c. 627,500 d. 647,500

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.5E: Change in Estimate Assume that Bloomer Company purchased a new machine on January 1, 2016, for...

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Change in Estimate Assume that Bloomer Company purchased a new machine on January 1, 2016, for $80,000. The machine has an estimated useful life of nine years and a residual value of $8,000. Bloomer has chosen to use the straight-line method of depreciation. On January 1, 2018, Bloomer discovered that the machine would not be useful beyond December 31, 2021, and estimated its value at that time to be $2,000. Required Calculate the depreciation expense, accumulated depreciation, and book value of the asset for each year 2016 to 2021. Was the depreciation recorded wrong in 2016 and 2017? If so, why was it not corrected?
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