Assume that the estimate of an asset's useful life is changed at the beginning of Year 2. Explain the implications of revising that estimate on previous, current, and future calculations of deprecation and how depreciation using the straight-line method would then be computed in Year 2.
What will be an ideal response?
Answers will vary.
Because revisions of such estimates are common, generally accepted accounting principles call for incorporating the revised information into present and future calculations. Prior reports are not corrected (or changed).
Year 2 Depreciation charge = [Book value as of beginning of Year 2 ? Estimated salvage value] ÷ Remaining useful life
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