The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2013. A machine was purchased on January 1, 2011, at a cost of $150,000. The machine has an estimated useful life of 10 years and a residual value of $9,000. What adjustment is needed for fiscal 2012?

Question

Quizplus · Accepted Answer

The adjustment needed for fiscal 2012 is $9,900. Under the double-declining-balance method, the depreciation for 2011 would be $30,000 (20% of $150,000), and for 2012 it would be $24,000 (20% of $120,000). The straight-line method would have resulted in $14,100 per year (($150,000 - $9,000) / 10 years). The difference for 2012 is $24,000 - $14,100 = $9,900.

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