How much would retained earnings decreased

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Question - The Company bought an equipment on 6/30/20x1 for 2,000,000. It has a useful life of 15 years and a residual value of 100,000. Its operating cycle is 1 year and it ends every December 31.

On 1/1/2023, the company revised its assumptions regarding the depreciation of equipment. Based on their research, they concluded that the equipment has a remaining useful life of 8 years, and its residual value should be 80,000 instead.

Assume that there were no errors in 2023, and that the change in accounting estimates in 2023 has been correctly implemented.

On 12/31/2024, the company made changes in accounting policies while the books are still open. One effect of such changes would be, the equipment that was being depreciated should have been treated as Prepaid Supplies instead, and such supplies would be evenly used for 3 years from the time it was purchased.

Required - How much would've Retained Earnings decreased if it treated the asset originally as supplies?

Reference no: EM133169555

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