Question: ABC LTD has depreciated a machine over its expected useful life of 5 years. The cost of machine was $100,000 and annual depreciation charge was

ABC LTD has depreciated a machine over its expected useful life of 5 years. The cost of machine was $100,000 and annual depreciation charge was therefore $20,000. No residual value is expected at the end of the machine's useful life.

Three years later, the remaining useful life of the machine was estimated to be only 1 year.

ABC LTD should account for the change in estimate prospectively by allocating the net carrying amount of the asset over its remaining useful life.

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