Edward decides to adjust the estimated service life of development equipment from 10 years to 6 years. He also plans to adjust estimated residual values on development equipment to zero as it is nearly impossible to accurately estimate residual values on equipment like this anyway.
1.Explain how the adjustment of estimated service life from 10 years to 6 years will affect depreciation expense and net income.
2.Explain how the adjustment of estimated residual values to zero will affect depreciation expense and net income.
3.In addition to heading off additional government regulations, why might Energy Resources have an incentive to report lower profits in the current period?