Change in Depreciation Estimates and Depreciation Method
Yuki, Inc., acquired the following assets on January 1, 2005.
|
Equipment, estimated useful life 5 years; residual value $13,000 |
$513,000 |
|
Building, estimated useful life 40 years; no residual value |
900,000 |
The equipment has been depreciated using the sum of the years’ digits method for the first three years. In 2008, the company decided to change the method of depreciation to straight line. No change was made in the estimated service life or residual value. The company also decided to change the total estimated useful life of the building from 40 to 45 years with no change in the estimated residual value. The building is depreciated on the straight line method. The company has 200,000 shares of capital stock outstanding. Partial results of operations for 2008 and 2007 are as follows:
|
2008 |
2007 |
|
|
Income before depreciation |
$890,000 |
$856,000 |
Instructions:
1. Compute depreciation expense for 2008.
2. Compute earnings per share for 2007 and 2008. (Ignore income tax effects.)