Changes in accounting estimates
(a) On Jan 01, 01, entity E acquired a machine (property, plant, and equipment) for CU 100 that was available for use on the same date. The machine”s useful life was originally estimated to be 10 years. At the end of 05 it becomes clear that the entire useful life of the machine is eight years instead of 10 years due to changed circumstances.
Posting status:
Depreciation expense of CU 10 was recognized in each of the years 01–04.
(b) On Dec 31, 04, E recognized a provision in the amount of CU 8. On Dec 31, 05, the best estimate of the expenditure required to settle the obligation is CU 12 due to changed circumstances.
Required
Prepare any necessary entries in E”s financial statements as at Dec 31, 05. E has to present only one comparative period (i.e. the year 04) in its financial statements.
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