Accounting HELP!!!?

Question

i am having a heck of a time with this question. If someone can help me out?

A revision of an estimate which extends the assests useful life:
a) requires restatement of prior years finanical statements
b) increases depreciation expense per year for the remaining years of the assests life
c) is ignored until the last year of the assests life
d) decreases depreciation expense per year for the remaining years of the assests life

Answer 1

Answer is d. If the item can be used for LONGER than originally estimated then you adjust the yearly depreciation..

Answer 2

A revision of an estimate which extends the asset's useful life:
d) decreases depreciation expense per year for the remaining years of the asset's life.

Just remember the general rule (but pls note that there are exceptions) - a change in accounting policy is accounted for RETROSPECTIVELY, meaning you have to adjust opening retained earnings and restate comparatives, presenting them as if the new accounting policy had always been applied, while a change in accounting estimates is accounted for PROSPECTIVELY, meaning you only take into account the changes going forward. You don't change the prior figures. In your case, you're dealing with a change in a/cg estimate. Since the cost of the asset does not change, a longer estimated useful life would result in a lower depreciation charge going forward.

If you wish to know more, read the IAS 8 and concentrate on paras 22 and 32.

Answer 3

a

Answer 4

D is correct.