Asked by Abigail Aleman on May 08, 2024
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Royal,Inc.discovered that equipment purchased three years ago for $300,000 will not last as long as originally estimated.The firm was depreciating the equipment at the rate of $40,000 per year with an estimated salvage value of $20,000.New estimates indicate that the equipment will last a total of five years with no salvage value.How much should Royal,Inc.record as depreciation in year four?
A) $40,000
B) $60,000
C) $90,000
D) $120,000
Depreciation Rate
The percentage or method used annually to allocate the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.
Salvage Value
The estimated residual value of an asset after the asset has reached the end of its useful life.
Equipment Purchase
The acquisition of physical assets like machinery, computers, or production tools for business operations, often involving capital expenditure.
- Comprehend the reporting of alterations in accounting principles and estimates, along with their effect on financial statements.
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Learning Objectives
- Comprehend the reporting of alterations in accounting principles and estimates, along with their effect on financial statements.
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