The service life of a building that has been depreciated for 30 years of an originally estimated 50-year life (no residual value) has been revised to an estimated remaining life of 10 years. Based on this information, the accountant should
A) continue to depreciate the building over the original 50-year life.
B) depreciate the remaining book value over the remaining life of the asset.
C) adjust accumulated depreciation to its appropriate balance through net income, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.
D) adjust accumulated depreciation to its appropriate balance through retained earnings, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.

Question

Quizplus · Accepted Answer

Since the estimated remaining life of the building is 10 years, it is appropriate to depreciate the remaining book value over the remaining life of the asset (in this case, 10 years). Continuing to depreciate the building over the original 50-year life would not accurately reflect the remaining useful life of the asset, and adjusting accumulated depreciation through net income or retained earnings would also not be appropriate as it would result in a significant adjustment to the financial statements in the current period. Therefore, option B is the best choice.

The Service Life of a Building That Has Been Depreciated