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Swift Company purchased a machine on January 1, 2009, for $300,000.At the date of acquisition, the machine had an estimated useful life of six years with no residual value.The machine is being depreciated on a straight-line basis.On January 1, 2012, Swift determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no residual value.An accounting change was made in 2012 to reflect this additional information.
-What is the amount of depreciation expense on this machine that should be charged in Swift's income statement for the year ended December 31, 2012?

Question

Quizplus · Accepted Answer

The machine was initially depreciated over 6 years, so the annual depreciation was $50,000 ($300,000/6). By 2012, 3 years of depreciation had been recorded, totaling $150,000. The remaining book value is $150,000 ($300,000 - $150,000). With the revised useful life of 8 years, there are 5 years remaining (8 total - 3 used). The new annual depreciation is $30,000 ($150,000/5).

Use the Following Information for Questions