On January 1, 2013, Bérubé Ltée acquired equipment costing $60,000. It was estimated at that time that the equipment would have a useful life of five years and a residual value of $4,500. The straight-line method of depreciation is used by Bérubé for its equipment, and its year end is December 31. At the beginning of 2015 (the beginning of the third year of the equipment's life), the company's engineers reconsidered their expectations. They estimated that the equipment's useful life would more likely be seven years in total, instead of the previously estimated five years.
Instructions
(a) Calculate the equipment's accumulated depreciation and carrying amount at the beginning of 2015, immediately before the change in useful life.
(b) Would you expect the company's depreciation expense to increase or decrease in 2015 after the change in useful life? Why?
(c) Should Bérubé treat the change in the useful life retroactively or only for current and future periods? Explain.
(d) If the company had not revised the equipment's remaining useful life at the beginning of 2015, what would its total depreciation expense have been over the equipment's life? What would have been the accumulated depreciation and carrying amount at the end of the equipment's useful life?
(e) Would you expect Bérubé's total depreciation expense to change after the useful life has been revised? Would there be changes to the accumulated depreciation and carrying amount at the end of the equipment's useful life?