SkiPark Company purchased a gondola for $440,000 (no residual value) at the beginning of 2015. The gondola was being depreciated over a 10-year life using the double-declining method. At the beginning of 2018, it was decided to change to straight-line. An accompanying disclosure note would include each of the following except:
A) The effect of a change on any financial statement line items affected for all periods reported.
B) Justification that the change is preferable.
C) The cumulative effect of the change.
D) The effect of a change on per share amounts affected for all periods reported.

Question

Quizplus · Accepted Answer

A change in depreciation methods is considered a change in estimate, and as such is accounted for prospectively. However, the disclosure note should disclose the justification that the change is preferable, the effect of a change on any financial statement line items affected for all periods reported, and the effect of the change on per share amounts affected for all periods reported.

SkiPark Company Purchased a Gondola for $440,000 (No Residual Value)