Answer:
Revised depreciation expense for 2018 = $14,400
Explanation:
Cost of machinery = $90,000
Salvage value = $0
Expected life = 5 years
Date of purchase of machinery = 1 January, 2017
Depreciation for the year 2017 = ($90,000 - $0)/5 = $18,000 per year under straight line method.
Book value at end of year 1 = $90,000 - $18,000 = $72,000
Now on 1 Jan 2018 company decides to use the machinery for total of 6 years
That is time period left = 6 years - Already used 1 year = 5 years
Depreciation = $72,000/5 years = $14,400 per year as life from now is 5 years for which depreciation will be as follows.
Note: No reverse adjustment is possible in previous year financial statements.
Revised depreciation expense for 2018 = $14,400
