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Sagot :
Answer:
Burbank Company
1. The annual depreciation expense prior to the change in estimates is:
= $6,000.
2. The annual depreciation expense after the change in estimates is:
= $10,250.
3. The net effect of the changing estimates on the balance sheet, net income, and cash flows for the year:
The balance sheet = the accumulated depreciation will increase to $88,250.
The net income will reduce by $4,250.
The cash flows will not be affected, as depreciation is not a cash flow item.
Explanation:
a) Data and Calculations:
Cost of office building = $330,000
Accumulated depreciation = $78,000
Estimated useful life = 50 years
Estimated residual value = $30,000
Depreciable amount = $300,000
Annual depreciation expense (straight-line method) = $6,000 ($300,000/50)
Revised Estimates:
Cost of office building = $330,000
Accumulated depreciation = $78,000
Estimated useful life = 30
Residual value = $22,500
Depreciable amount = $307,500
Annual depreciation expense (straight-line method) = $10,250 ($307,500/30)
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