Truman Company acquired machinery on January 1, 2017 which it depreciated under the straight-line method with an estimated life of fifteen years and no residual value. On January 1, 2022, Truman estimated that the remaining life of this machinery was six years with no residual value. How should this change be accounted for by Truman? Group of answer choices As the cumulative effect of a change in accounting principle in 2022 As a prior period adjustment By continuing to depreciate the machinery over the original fifteen-year life By setting future annual depreciation equal to one-sixth of the book value on January 1, 2022

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Depreciation Methods

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 expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

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 reduces over time.