Prior to 2013, Trapper John Inc. used sum-of-the-years'-digits depreciation on its store equipment. Beginning in 2013, Trapper John decided to use straight-line depreciation for these assets. The equipment cost $3 million when it was purchased at the beginning of 2011, had an estimated useful life of five years and no estimated residual value. To account for the change in 2013, Trapper John:
A)Would retrospectively report $600,000 in depreciation expense annually for 2011 and 2012, and report $600,000 in depreciation expense for 2013.
B)Would adjust accumulated depreciation and retained earnings for the excess charges made in 2011 and 2012.
C)Would report depreciation expense of $400,000 in its 2013 income statement.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The change in depreciation method is treated as a change in estimate, which is applied prospectively. The remaining book value at the beginning of 2013 is depreciated over the remaining useful life using the new method.