Problem 5: Change in depreciation
estimates

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Question: Problem 5: Change in depreciation estimates Universal Tools Company purchased a machine on July 1…
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Universal Tools Company purchased a machine on July 1, 2015 for
$180,000. The machine was estimated to have a useful life of 10
years and a salvage value of $20,000. The company’s fiscal year
ends on December 31.

Required:

What was Universal Tools’ depreciation expense for 2015 and 2016
under the Double-declining balance method?

Suppose on Jan. 1, 2017, Universal Tools decided that the
machine’s remaining useful life (starting from Jan. 1, 2017) was
only 6 years and the salvage value was only $15,000, and that it
was more appropriate to apply the straight-line depreciation method
from then on. Calculate the depreciation expense for 2017.

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