Question: Bliss Company owns an asset with an estimated life of
Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero; it uses the straight-line method of depreciation. At the beginning of the sixth year, the asset’s book value is $200,000 and Bliss Company changes the estimate of the asset’s life to 25 years, so that 20 years now remain in the asset’s life. Explain how this change will be accounted for in Bliss Company’s financial statements, and compute the current and future annual depreciation expense.
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