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The Peridot Company purchased machinery on January 2, 2019, for $800,000. A five-year life was estimated and

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The Peridot Company purchased machinery on January 2, 2019, for $800,000. A five-year life was estimated and no residual value was anticipated. Peridot decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 2019 and 2020. Early in 2021, the company revised the total estimated life of the
machinery to eight years.


Required:
1. What type of change is this?
2. Is Peridot required to revise prior years’ financial statements as a result of the change?
3. Is Peridot required to provide a disclosure note to report the change?
4. Determine depreciation for 2021.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Requirement 1 This is a change in accounting estimate Requirement 2 No When an estimate is ...View the full answer


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Related Book For  answer-question
Intermediate Accounting

Intermediate Accounting

ISBN: 978-1260481952

10th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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