ACCA FA · Chapter 6 · Question 9 of 12
A machine was bought on 1 January 20X1 for $90,000 with a useful life of 10 years and no residual value, depreciated on a straight-line basis. On 1 January 20X4 the remaining useful life was revised to 4 years. What is the depreciation charge for 20X4?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $15,750
Explanation
A change in useful life is a change in accounting estimate, applied prospectively. Depreciation for 20X1 to 20X3 = 3 x $9,000 = $27,000, so the carrying amount at 1 January 20X4 = $63,000. The new charge = $63,000 / 4 = $15,750. Dividing the original cost by 4 years gives $22,500, and $9,000 ignores the revision.
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