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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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What is the proper accounting for depreciation when new or additional information becomes available that causes a company to change its estimates of useful life or residual value?

To determine

Introduction:

The wear and tear of an asset due to its use over a period affects its value. Companies charge depreciation expense each year for reduction in value of the asset due its wear and tear.

To explain:

The accounting of revised depreciation.

Explanation

The depreciation of an asset is due to wear and tear of the asset. Company may revise useful life of asset or salvage value. Revision of salvage value or useful life (or both) affects the depreciation expense.

Besides, if company incurs capital expenditure then it shall compute the revised depreciation expense (based on the revised values).

The company does not change the existing depreciation charged on the asset...

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