accounting-Picard Enterprises purchased a spaceship on November 1, 2014 for $120 million

QUESTION

Picard Enterprises purchased a spaceship on November 1, 2014 for $120 million. Test runs and weapon system checks costing $20 million were performed to prepare the spaceship for duty. Picard estimates that the ship will last 6 years and can be sold at a salvage value of $20 million. Picard uses the straight-line method of depreciation for financial reporting and applies the half-year convention to assets placed in service in the middle of a fiscal year. On January 1, 2017 the Company determines that the salvage value of the ship will be $10 million and that the ship will only remain useful until December 31, 2018. Provide thefootnote disclosurerelated to Picard’s change in depreciation policy for the year ended December 31, 2017. Show calculations.

ANSWER:

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