Chapter 4 The Income Statement and Statement of Cash Flows30

Chapter 4 The Income Statement and Statement of Cash Flows30

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Exercise 4-10 Requirement 1 This is a change in accounting estimate. Requirement 2 When an estimate is revised as new information comes to light, accounting for the change in estimate is quite straightforward. We do not restate prior years' financial statements to reflect the new estimate. Instead, we merely incorporate the new estimate in any related accounting determinations from there on. If the after-tax income effect of the change in
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Unformatted text preview: estimate is material, the effect on net income and earnings per share must be disclosed in a note, along with the justification for the change. Requirement 3 $800,000 Cost $160,000 Previous annual depreciation ($800,000 5 years) x 2 years 320,000 Depreciation to date (2009-2010) 480,000 Book value __ 6 yrs. Estimated remaining life (8 years - 2 years) $ 80,000 New annual depreciation...
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