The difference between its replacement value and cost.
The amount allowable under MACRS.
(TCO 4)Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,000. Using the straight-line method, depreciation for 2011 would be:
None of the above is correct.
(TCO 4)A change in the estimated useful life and residual value of machinery in the current year is handled as:
A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.
A prospective change from the current year through the remainder of its useful life, using the new estimates.
A cumulative adjustment to income in the current year for the difference in depreciation under the new vs. old estimates.