You're running a potato chip company in early 2023. You have decided to review the residual value
Question:
You're running a potato chip company in early 2023. You have decided to review the residual value and useful life of your main assembly line. The assembly line cost $900,000 on January 1, 2013, with an estimated residual value of $45,000 (using straight-line depreciation). It was expected to last 20 years. The equipment is now being revised to an expected total life of 25 years (or 15 years remaining) and the residual value to $60,000.
Instructions:
(a) Calculate the assembly line's carrying amount at Dec 31, 2022.
(b) As a result of this revision, will the depreciation expense for 2023 and subsequent years be higher or lower? Why? (You do not have do show any detailed calculations.)
(c) Will the company need to revise prior years' depreciation expense? Why or why not?
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson