Accounting Principle Change
Mesple Music, Inc. purchased musical instrument equipment on January 1, 1999, for $25,000. Mesple depreciated it on the straight-line basis over five years with no salvage value. However, on January 1, 2001, the company realized that the productive capacity of this equipment is declining, so it decided to change to the double-declining balance method of depreciation.
Required
a. Calculate depreciation expense for 1999 and 2000, using the straight-line method.
b. Calculate depreciation expense for 1999 and 2000, using the double-declining balance method.
c. Show the cumulative effect of the change in the year 2001 in terms of the effects on the balance sheet equation.
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