A21-8 Change in Estimated Useful Life (LO 21-1, 21-6, 21-8)Stacey Corp. has been depreciating equipment over a 10-year life on a straight-line basis. The equipment, which cost $28,600, waspurchased on 1 January 20X1. It has an estimated residual value of $7,600. On the basis of experience since acquisition, managementhas decided in 20X5 to depreciate it over a total life of 14 years instead of 10 years, with no change in the estimated residual value.The change is to be effective on 1 January 20X5. The 20X5 financial statements are prepared on a comparative basis; 20X4 and 20X5incomes before depreciation were $54,100 and $56,400, respectively. Disregard income tax considerations.3. Show how the accounting change, the equipment, and the related depreciation should be reported on the 20X5 financialstatements, including comparative 20X4 results.Comparative SFP, 31 December:EquipmentAccumulated depreciationNet book valueComparative SCI for year.Earnings prior to depreciation and taxDepreciation expenseEarnings before tax20X520X4$0$0$0$0

Change in Depreciation due to revising useful life of asset:Change in useful life of an asset is…

Answered: 3. Show how the accounting change, the…

3. Show how the accounting change, the equipment, and the related depreciation should be reported on the 20X5 financial statements, including comparative 20X4 results.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 76APSA

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