When Foster Research, a private medical research company, purchased their spectrophotometer in 2005, they calculated a salvage value of $3,000 for the machine. However, now in 2017, the software that runs the spectrophotometer is obsolete, and the new salvage value is calculated at $500. How should this change be recorded

The question is centred on change in accounting estimates,since such change is not due to errors,the change in salvage value of the spectrophotometer,should be reflected in the accounts prospectively and not retrospectively.

That means,the increase in depreciation of the medical equipment due to reduction in salvage, value should be shown in the accounts from 2017 onward.

Explanation:

Accounting estimate is about approximating the amount of debit or credit that should be posted in the books of accounts for items, where no precise amount can be ascertained.

Accounting estimate is applicable to the following:

Useful live of an asset

Asset salvage value

Provision for bad and doubtful debts.

answer; the cpi;