A finished ACC-370 Topic 6 depreciation estimate change problem example, revising life and residual value midway, applying the change prospectively and showing what the rejected method would have charged. Searches like "acc 370 topic 6 assignment example", "acc370 topic 6 sample" and "acc-370 topic 6 example" land here.
What a finished ACC-370 Topic 6 depreciation estimate change problem looks like
The asset comes first, all figures illustrative: $80,000 cost, $8,000 expected residual value and an eight-year life, depreciated straight-line at $9,000 a year. After three years the book value stands at $53,000. An engineering review then extends the total life to ten years and cuts the residual to $4,000, and the example recomputes depreciation from that point: $49,000 spread over the seven remaining years, $7,000 a year. It states that the three earlier years are left untouched and explains why a change in estimate is not an error. A side table runs double-declining balance over the same three years, $20,000, $15,000 and $11,250, to show what the rejected method assumed about when the machine delivers its benefit. A closing note gives the disclosure the revision requires and its effect on the current year's income.
How an ACC-370 Topic 6 example is structured
The problem proceeds in the order the facts arrive. It opens with the original estimates and the reasoning behind straight-line, so the reader knows what the company believed when it bought the machine. A second part presents the first three years of depreciation and the book value they leave. The revision comes third: what the engineering review found, which estimates changed and why the change is classified as an estimate rather than an error. The fourth part recomputes depreciation prospectively, showing the new depreciable base and remaining life. A fifth part runs double-declining balance over the same early years as a comparison, explaining the pattern of benefit each method encodes. The final part states the current-year effect of the revision, $2,000 less depreciation than under the old estimate, and describes the note disclosure a reader of the statements would see.
Original estimates stated with reasons
Life, residual value and method are given alongside what the company expected of the machine, so the later revision has a baseline to depart from.
Estimate separated from error
The revision rests on new information from an engineering review, which makes it a change in estimate and explains why no prior year is restated.
Prospective recalculation from book value
Remaining book value less the new residual, spread over the new remaining life, gives the revised charge with every input visible to the marker.
The rejected method run alongside
Double-declining balance over the same three years shows the heavier early charge a front-loaded benefit pattern would justify, and why the facts did not support it.
Current-year effect and disclosure
The $2,000 reduction in this year's depreciation is stated along with the note a reader would see, since a quiet estimate change is still a reported one.
Where marks go in ACC-370 Topic 6
Estimate changes are marked for treatment first and arithmetic second. Restating the prior three years to the new life treats a change in estimate as an error correction, which is the classification this topic is set to test. Recomputing from original cost rather than from current book value double counts depreciation already taken and produces a charge that cannot be reconciled. Forgetting to change the residual value along with the life leaves half the revision unapplied. Treating double-declining balance as the better answer because it is more conservative misses that the method should follow the pattern of benefit, and these facts describe even use. A problem that records the new charge without stating its effect on current income, or the disclosure it triggers, leaves the reader unaware that reported earnings moved for a reason other than operations.
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Send the ACC-370 Topic 6 instructions, your rubric and the asset data or revision facts you were assigned. We write a custom example to them, with the original schedule, the revision classified and applied prospectively from book value, the rejected method run for comparison and the current-year effect stated, back in 24 to 48 hours. The first one is free.
ACC-370 Topic 6 questions, answered
Why is a change in useful life not applied retroactively?
Because the earlier depreciation was based on the best information available at the time, so it was not wrong. A change in estimate reflects new information and is applied in the current and future periods only. Retroactive restatement is reserved for errors and for most changes in accounting principle, and treating an estimate revision that way misstates periods that were correctly reported.
Is a change in depreciation method a change in estimate?
Under US GAAP it is treated as a change in accounting estimate effected by a change in accounting principle, and it is applied prospectively like an estimate. The company must still justify the new method as preferable, typically because it better reflects the pattern in which the asset's benefits are consumed. Coursework sometimes asks for that justification in a sentence.
Where do revised estimates come from?
From evidence the company did not have earlier: engineering reviews, maintenance history, experience with similar assets, technological change or a change in the asset's use. The example ties its revision to an engineering review for that reason. A revision with no stated basis looks like an adjustment chosen to move income, and markers usually ask what prompted it.