Bailey Limited has discovered that the estimated useful life for a material depreciable asset is incorrect due to a change in the way the asset is being used. The correct accounting treatment for this event is to:

Question

Quizplus · Accepted Answer

The correct accounting treatment for a change in the estimated useful life of a depreciable asset due to a change in its usage is to treat it as a change in an accounting estimate and adjust prospectively. This means that the depreciation expense going forward should be based on the new estimate, but the past financial statements should not be restated or revised. The disclosure of this change is required in the notes to the financial statements. Therefore, choice C is the best option.

Bailey Limited Has Discovered That the Estimated Useful Life for a Material