Memo Assignment

Chapter 10 Plant Assets

Change in Estimate

You are the accountant for a small business. On January 2, 2014, the business purchased a large piece of equipment for $1,000,000. At that time, you used straight line depreciation, with no salvage value to depreciate the equipment over 15 years. It is now January 2, 2018 and you realize that your estimate on the useful life was inaccurate. You now estimate that the equipment will only be useful for 10 years from the date of acquisition.

Write a memo to the President, Janet Brown, describing how this change will affect the 2018 financial statements, both the income statement and balance sheet. Explain how you calculated the new depreciation expense and accumulated depreciation. Also, discuss how this change will affect prior years financial statements.

Remember your audience. Your memo must be concise. It must be completely free of spelling and grammatical errors. Refer to the textbook, Change in Estimates for Depreciation.

Here is a quote for you to keep in mind while writing in this class.

The most valuable of all talents is that of never using two words when one will do. Thomas Jefferson