At the end of each year, Patty Chu, the chief accountant at Rex Lin Enterprises, a Singapore-based
Question:
At the end of each year, Patty Chu, the chief accountant at Rex Lin Enterprises, a Singapore-based trading company, reviews long-term assets at the end of each year to determine whether changes are called for in how these assets are depreciated. In December 2017, her attention focused on two assets in particular:
Proposed changes
For the warehouse: a decrease in the useful life to 20 years and a decrease in residual value to $6,000.For the building: an increase in the useful life to 50 years and a decrease in the residual value to $55,000.
Use Microsoft Excel to show the calculations of depreciation with the straight line method prior to and after the recommended changes. In addition, in a Microsoft Word document, write a memo from Patty Chu to Patty’s boss comparing the results of the old and new depreciation expense amounts. Within the memo, discuss the impact to the income statement and balance sheet if these changes are approved. Finally, provide a recommendation on whether the changes should be made; use your calculations to support your position.
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett