Button Ltd has been in operation for 3 years. All of its manufacturing equipment, which has a
Question:
Button Ltd has been in operation for 3 years. All of its manufacturing equipment, which has a useful life of 10 to 12 years, has been depreciated on a straight-line basis. During the fourth year, Button Ltd changes to an accelerated depreciation method for all of its equipment.
(a) Will Button Ltd report more profit as a result of this change?
(b) How will this change be reported?
Step by Step Answer:
a Button Ltd is switching to an accelerated depreciati...View the full answer
Financial Accounting Reporting Analysis And Decision Making
ISBN: 9780730313748
5th Edition
Authors: Shirley Carlon, Rosina Mladenovic Mcalpine, Chrisann Palm, Lorena Mitrione, Ngaire Kirk, Lily Wong
Related Video
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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