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The Peridot Company purchased machinery on January 2, 2019, for $880,000
The Peridot Company purchased machinery on January 2, 2019, for $880,000. A five-year life was estimated and no residual value was anticipated. Peridot decided to use the straight-I0e depreciation method and recorded $176,000 in depreciation in 2019 and 2020. Early in 2021, the company revised the total estimated life of the machinery to eight years.
Required: 1. What type of change is this? 2. Is Peridot required to revise prior years' financial statements as a result of the change? 3. Is Peridot required to provide a disclosure note to report the change? 4. Determine depreciation for 2021.
Expert Solution
Answer:
1) This is a Change in Accounting Estimate and the Change (or corrections to be made) is Prospectively.
2) No. A change in accounting estimate is handled prospectively. At the time of the change, the book value of the machinery (cost – accumulated...
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