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    Accounting for a Change in Estimated Depreciation for Dell Co. (Dot Co.)

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    Dell Co. has purchased equipment for $510000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been entered for 7 years on a straight line basis. In 2009, it was determine that the total estimated life should be 15 years with a salvage value of $5000 at the end of that time.
    (a) prepare the entry (if any) to correct the prior years depreciation.
    (b) Prepare the entry to record the depreciation for 2008.

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    Solution Preview

    (a) A change in estimate does not require any changes to prior years. All changes in estimates are handled "prospectively" which means just going forward. So, we will adjust 2009 and forward but not go back and change the 7 years ...

    Solution Summary

    The "rule" is discussed and then the computations are shown for you.