Prior to 2018, Trapper John Inc. used sum-of-the-years'-digits depreciation on its store equipment. Beginning in 2018, Trapper John decided to use straight-line depreciation for these assets. The equipment cost $3 million when it was purchased at the beginning of 2016, had an estimated useful life of five years and no estimated residual value. To account for the change in 2018, Trapper John:

To account for the change in 2018, Trapper John would report depreciation expense of $400,000 in its 2018 income statement.

Explanation:

A change in depreciation methods is considered to be a change in accounting estimate that is achieved by a change in accounting principle and handled prospectively.

The computation is as follows:

Book value at 1/1/2018 = $3,000,000 [(5/15 x $3,000,000) + (4/15 x $3,000,000)

= $1,200,000.

New depreciation= $1,200,000/3= $400,000 per year for 2016-2018.

answer; normative economics;