Young Corporation decided to change its depreciation policy by (1) changing from double-declining-balance depreciation, and (2) changing the estimated useful life on all automobiles used in the business from five years to four years.
Which of the following is correct concerning these two changes?
A) Both are changes in accounting principle.
B) Both are changes in accounting estimate.
C) One is an error correction, and one is change in accounting principle.
D) One is a change in estimate effected through a change in accounting principle, and one is a change in estimate.

Question

Quizplus · Accepted Answer

The change from double-declining-balance depreciation to some other method is a change in accounting principle, while changing the estimated useful life of assets is a change in estimate. Therefore, one change is a change in estimate effected through a change in accounting principle (change in estimated useful life) and the other is a change in accounting estimate (change in depreciation method).

Young Corporation Decided to Change Its Depreciation Policy by (1)