Question Details

Grant Company has decided to change the estimate of the useful life of an asset 


1.	Palmer Company purchased equipment for $45,000 on January 1, 2001, and will use the doubledeclining-balance method of amortization. It is estimated that the equipment will have a 3-year life and a $2,000 residual value at the end of its useful life. The amount of amortization expense recognized in the year 2003 will be
		a.	$5,000.
		b.	$3,000.
		c.	$5,444
		d.	$3,444.

	2.	A capital asset was purchased on January 1 for $30,000 with an estimated residual value of $6,000 at the end of its useful life. The current year's Amortization Expense is $3,000 calculated on the straight-line basis and the balance of the Accumulated Amortization account at the end of the year is $15,000. The remaining useful life of the plant asset is
		a.	10 years.
		b.	8 years.
		c.	5 years.
		d.	3 years.

	3.	A change in the estimated useful life of equipment requires
		a.	a retroactive change in the amount of periodic amortization recognized in previous years.
		b.	that no change be made in the periodic amortization so that amortization amounts are comparable over the life of the asset.
		c.	that the amount of periodic amortization be changed in the current year and in future years.
		d.	that income for the current year be increased.

	4.	Grant Company has decided to change the estimate of the useful life of an asset that has been in service for 2 years.  Which of the following statements describes the proper way to revise a useful life estimate?
		a.	Revisions in useful life are permitted if approved by the Canada Customs and Revenue Agency.
		b.	Retroactive changes must be made to correct previously recorded amortization.
		c.	Only future years will be affected by the revision.
		d.	Both current and future years will be affected by the revision.
	5.	Ling's Copy Shop bought equipment for $18,000 on January 1, 2001. Ling estimated the useful life to be 3 years with no residual value, and the straight-line method of amortization will be used. On January 1, 2002, Ling decides that the business will use the equipment for 5 years. What is the revised amortization expense for 2002?
		a.	$6,000.
		b.	$2,400.
		c.	$3,000.
		d.	$4,500.




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