Canliss Milling Company purchased machinery on January 2, 2009, for $800,000. A five-year life was estimated and no residual value was anticipated.

Canliss Milling Company purchased machinery on January 2, 2009, for $800,000. A five-year life was estimated and no residual value was anticipated. Canliss decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 2009 and 2010. Early in 2011, the company revised the total estimated life of the machinery to eight years.

Required:

1. What type of accounting change is this?

2. Determine depreciation for 2011.

Solutions

Expert Solution

Requirement 1

This is a change in the accounting estimate.

Requirement 2

$800,000 Cost

$160,000 Previous annual depreciation ($800,000 ÷ 5 years)

x 2 years 320,000 Depreciation to date (2009-2010)

480,000 Book value

÷ 6 yrs. Estimated remaining life (8 years - 2 years)

$ 80,000 New annual depreciation

Requirement 1: Change in accounting estimate

Requirement 2: $ 80,000

Renze Joy Candido answered 2 years ago

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