Chap020 (accounting) 62

# Chap020 (accounting) 62 - 53 Prior to 2011 Trapper John Inc...

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53. Prior to 2011, Trapper John Inc. used sum-of-the-years'-digits depreciation for its store equipment. Beginning in 2011, Trapper John decided to use straight-line depreciation for these assets. The equipment cost \$3 million when it was purchased at the beginning of 2009, had an estimated useful life of five years and no estimated residual value. To account for the change in 2011, Trapper John: A. Would retrospectively report \$600,000 in depreciation expense annually for 2009 and 2010, and report \$600,000 in depreciation expense for 2011. B. Would adjust accumulated depreciation and retained earnings for the excess charges made in 2009 and 2010. C. Would report depreciation expense of \$400,000 in its 2011 income statement. D. None of the above is correct. A change in depreciation methods is considered to be a change in accounting estimate that is achieved by a change in accounting principle, and handled prospectively.
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Unformatted text preview: The computation is as follows: AACSB: Analytic Bloom's: Synthesis Learning Objective: 20-04 Explain how and why changes in estimates are reported prospectively. Level of Learning: Hard 54. Hepburn Company bought a copyright for \$90,000 on January 1, 2008, at which time the copyright had an estimated useful life of 15 years. On January 5, 2011, the company determined that the copyright would expire at the end of 2016. How much should Hepburn record as amortization expense for this copyright for 2011? A. \$14,400. B. \$7,200. C. \$8,000. D. \$12,000. 2008, 2009, 2010: \$90,000 15 = \$6,000 2011: [\$90,000 - (\$6,000 x 3)] 6 = \$12,000 AACSB: Analytic Bloom's: Application Learning Objective: 20-04 Explain how and why changes in estimates are reported prospectively. Level of Learning: Medium...
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