A change in the residual value of equipment is treated ______________.

Question

Quizplus · Accepted Answer

A change in the residual value of equipment is treated prospectively, meaning it is applied to future periods and not retroactively adjusted for past periods. This is because the residual value is an estimate at the time the equipment is acquired and can change over time due to factors such as wear and tear, changes in market demand, and technological advancements. Therefore, any adjustments to the residual value should be made going forward to ensure that the financial statements accurately reflect the current value of the equipment.

A Change in the Residual Value of Equipment Is Treated