Question

Which of the following is a change in accounting estimate?

I. A change from straight-line depreciation to double-declining balance method
II. A change in estimated residual value of depreciable asset
III. A change in estimated useful life of an asset
IV. Recording depreciation for the first time on machinery purchased five years ago
a.II, III
b.I, II, III
c.I, II, III, IV
d.II, III, IV

Answer 1

A change in accounting estimate refers to a modification made to the estimated amount or useful life of an asset. Examples of changes in accounting estimates include modifying depreciation methods, residual values, useful life, and retroactively applying depreciation.

Step-by-step explanation:

A change in accounting estimate refers to a modification made to the estimated amount or useful life of an asset that is based on new information or circumstances. From the given options, all of them are examples of changes in accounting estimates:

1. A change from straight-line depreciation to double-declining balance method is a change in accounting estimate because it involves modifying the method used to calculate depreciation.
2. A change in estimated residual value of a depreciable asset is a change in accounting estimate because it affects the calculation of the asset's depreciation expense.
3. A change in estimated useful life of an asset is a change in accounting estimate because it influences the period over which the asset's cost is allocated.
4. Recording depreciation for the first time on machinery purchased five years ago is also a change in accounting estimate because it involves retroactively applying depreciation to previous periods.

Therefore, the correct answer is d.II, III, IV.