A machine originally had an estimated useful life of 5 years, but after 3 years it was decided that the original estimate of useful life should have been 10 years

Management Mar 23, 2021

A machine originally had an estimated useful life of 5 years, but after 3 years it was decided that the original estimate of useful life should have been 10 years. At the point the remaining cost to be depreciated should be allocated over the remaining:

1. 2 years
2. 5 years
3. 7 years
4. 8 years
5. 10 years

Expert Solution

Answer: c .

The calculation of remaining life for the purpose of depreciation is as follows:

The two remaining years of the 5 year estimated depreciation span + The five years extra of the machine's useful life = 7 years

Or,

As per accounting principles and standard in such case the depreciation amount is to be allocated among the remaining period = Original - Completed + Extended

= (5 - 3 + 5) years

= 7 years.

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