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Irwin, Inc. constructed a machine at a total cost of $56 million. Construction was completed at...

Irwin, Inc. constructed a machine at a total cost of $56 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $2 million. At the beginning of 2021, Irwin decided to change to the sum-of-the-years’-digits method.
Ignoring income taxes, prepare the journal entry relating to the machine for 2021.

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Answer #1
Computation of Depreciation as per SLM
Depreciaiton Expense= (Original Cost- Salvage Value)/ Useful life
(56-2)/10 = 5.40 Million
Accumulated Depreciation from 2018 to 2020=5.40 Million = $16.20
Book value on 2021= 56 Million-16.20 Million= $39.80 Million
Remainng Usefule Life= (10-3 )= 7 year
Computation of Depreciation as per SOYD for 2021
Depreciaiton Expense = (39.80 - 2)X7/28= $9.45
Journal Entry
Date Account Tittle Debit Credit
2021 Depreciation Expense 9.45 Million
Accumulted Depreciaiton 9.45 Million
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