If the estimated residual value of a depreciable asset increases, while all other estimates remain unchanged, what normally happens to future depreciation expense?
Correct answer: B. It decreases over the remaining useful life
- A. It increases in every future period
- B. It decreases over the remaining useful life
- C. It remains unchanged until disposal
- D. It becomes an immediate capital gain
Explanation
Depreciation is based on cost less residual value. A higher residual value reduces the depreciable amount, so future depreciation expense normally decreases over the remaining useful life.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
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