For a company using the straight-line method of depreciation that changes the estimated useful life from 20 years to 15 years remaining as at the beginning of the year, the accountant should do the following:

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Start by identifying the core principle: when a depreciation estimate changes, you apply the change prospectively to the current and future periods, using the asset’s carrying amount and the new remaining useful life.
Option 1: 'Compute current year depreciation as (carrying amount) x 15/20.' This suggests applying the old cost basis scaled by the new and old life, which is not how depreciation is recalculated after a change in estimate. It ignores the residual value and the need to base depreciation on net carrying value over the new remaining life. Therefore, this is incorrect.
Option 2: 'Compute current year depreciation as (original cost - residual value) divided by 15 years.' Here, the calculation uses the original cost (not the carrying amount) and subtracts residual value, but depreciation should be based on carrying amount (net book value) at the date of change, not on original cost. This also neglects any residual value implications for the current carrying amount, making it conceptually wrong.
Option 3: 'Adjust the amount of accumulated depreciation as at the beginning of the year.' Under the accounting standard for changes in estimation, you do not adjust past depreciation or accumulated depreciation. Instead, you adjust depreciation expense from the date of change forward. Hence, this option is incorrect because it implies retroactive or cumulative adjustment.
Option 4: 'Adjust prior year's depreciation.' This directly contradicts the principle of prospective application; prior years’ depreciation remains unchanged when an estimate is revised. Therefore, this statement is incorrect.
Option 5: 'Compute current year depreciation as (carrying amount - residual value) divided by 15 years.' This aligns with the correct approach: use the asset’s carrying amount at the start of the year, subtract any residual value, and allocate that amount over the new remaining life (15 years). It reflects the prospective treatment of changes in estimate under depreciation accounting.
In summary, options 1, 2, 3, and 4 each violate the standard rules for prospective adjustment after a change in estimate, while option 5 correctly applies the updated remaining life to the asset’s carrying amount net of residual value for the current year’s depreciation.

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For a company using the straight-line method of depreciation that changes the estimated useful life from 20 years to 15 years remaining as at the beginning of the year, the accountant should do the following:

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