Question 1

On January 1, Year 1, a company purchased a machine for $100,000. It is depreciated using the straight-line method over 10 years with no salvage value. On January 1, Year 3, the company changed the estimated useful life to a total of 8 years (from acquisition date) and established a salvage value of $4,000. What is the depreciation expense for Year 3?

Accepted Answer

Change in Estimate = Prospective.
1. Calculate Book Value at date of change.
2. Subtract new salvage value.
3. Divide by *remaining* useful life.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the original cost instead of BV. Using the new total life (8) instead of remaining life (6).

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 3

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