After using an expected useful life of seven years and no residual value to depreciate its machine over the preceding two years,a company decided early this year that the machine would last only three more years.The change in accounting estimate results in an adjustment to ending retained earnings for the prior period with no impact on any future periods.

Question

Quizplus · Accepted Answer

The change in accounting estimate does not adjust prior period retained earnings but affects depreciation expense for the current and future periods only, spreading the remaining book value over the revised useful life.

After Using an Expected Useful Life of Seven Years and No