The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2019.A machine was purchased on January 1,2017,at a cost of $150,000.The machine has an estimated useful life of 10 years and a residual value of $9,000.What is the appropriate accounting?

Question

Quizplus · Accepted Answer

Since the method of depreciation was changed from double-declining-balance to straight-line in fiscal year 2019, the depreciation expenses for the prior years would have been different. Therefore, a retrospective adjustment is required for both fiscal 2017 and 2018 to reflect the changes correctly in the financial statements. The adjustment for fiscal year 2019 would be a straightforward prospective adjustment as the new accounting policy would be implemented in that year. Hence, option B is the best choice.

The Method of Depreciation Was Changed from the Double-Declining-Balance Method