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Worked-example setupScope and assumptions
- Beacon's packaging press cost $36,000 and has $18,000 accumulated depreciation after three closed years.
- New maintenance and replacement information after Year 3 supports a $3,000 residual value and three remaining full years.
- The original estimate properly used information available at the earlier dates; no error or accounting-principle change is present.
- Straight-line continues to represent the remaining service pattern; no impairment, disposal, tax difference, or partial-period convention applies.
- Period
- Revision at the start of Year 4; projection through end of Year 6
- Units
- USD per full year
- Rounding
- Whole US dollars; no rounding required
First decide what changed
The accounting conclusion does not begin with division. Beacon used supportable information in Years 1–3. The updated maintenance history and approved replacement plan became available after Year 3. Those facts define a clean estimate revision, not correction of an earlier error.
If the facts instead said Beacon ignored an existing contract limit, the classification would need to be reconsidered. Never choose “prospective” simply because it is easier than investigating the information timeline.
Preserve the change-date bridge
$36,000 cost
− 18,000 accumulated depreciation through Year 3
= 18,000 carrying amount at revision
$18,000 carrying amount
− 3,000 revised residual value
= 15,000 remaining depreciable amount
$15,000 ÷ 3 remaining years
= $5,000 revised depreciation per year
Prior accumulated depreciation remains $18,000. Beacon records $5,000 in Year 4 and, if facts remain unchanged, in Years 5 and 6. Ending carrying amount after the three allocations is $3,000, the revised residual value.
Control the temptation to backsolve
A common wrong path recalculates the first three years using the revised inputs. That imports hindsight into periods whose stipulated estimates were supportable. Another wrong path allocates the original $36,000 cost again, double counting the $18,000 already recognized.
Interpret without inventing cash
The revised $5,000 expense changes future reported income and carrying amount relative to the old schedule. It does not generate cash, prove longer physical life, or establish market value. A finance review should ask why the operating evidence changed, whether capital plans are consistent, and how sensitive performance measures are to the revision.
Reconciliation check
$18,000 starting carrying amount
− ($5,000 × 3 years)
= $3,000 projected final carrying amount
The schedule is internally consistent. Evidence, not the tie-out alone, supports the revised inputs.
Verified calculation · prospective depreciation revision
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- accumulated depreciation at revision
- 18,000
- cost
- 36,000
- remaining useful life periods
- 3
- revised residual value
- 3,000
Recomputed result
| Measure | Value |
|---|---|
| accumulated depreciation at revision | 18,000 |
| carrying amount at revision | 18,000 |
| cost | 36,000 |
| projected final carrying amount | 3,000 |
| remaining depreciable amount | 15,000 |
| remaining useful life periods | 3 |
| revised depreciation per period | 5,000 |
| revised residual value | 3,000 |