On January 1, 2012, Rabbit Corp.acquired machinery which it depreciated using the straight-line method with an estimated useful life of fifteen years and no residual value.On January 1, 2017, Rabbit estimated that the remaining life of this machinery was six years with no residual value.This change should be accounted for
A)as a prior period adjustment.
B)as the cumulative effect of a change in accounting principle in 2017.
C)by setting future annual depreciation equal to one-sixth of the book value on January 1, 2017.
D)by continuing to depreciate the machinery over the original fifteen year life.

Question

Quizplus · Accepted Answer

The change in the estimated useful life of the machinery is a change in accounting estimate, not a change in accounting principle. Therefore, the remaining book value as of January 1, 2017, should be depreciated over the newly estimated remaining life of six years.