Problem 22-1 (Part Level Submission) Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you. 1. Holtzman purchased equipment on January 2, 2011, for $57,100. At that time, the equipment had an estimated useful life of 10 years with a $4,100 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,500 salvage value. 2. During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $400,000. It had a useful life of 10 years and a salvage value of $38,000. The following computations present depreciation on both bases for 2012 and 2013. 2013 2012 Straight-line $36,200 $36,200 Declining-balance 64,000 80,000 3. Holtzman purchased a machine on July 1, 2012, at a cost of $190,000. The machine has a salvage value of $20,000 and a useful life of 8 years. Holtzman’s bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value. Collapse question part (a) Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Cost of Equipment $ 57,100
Less: Salvage Value $ 4,100
Depreciable Cost $ 53,000
Depreciation in 2014 ;-
Year Cost Depreciation Cost less Depreciation
2011 $57100 $5300 $51800
2012 $51800 $5300 $46500
2013 $46500 $5300 $41200
Total Depreciation till 2014 = $5300+$5300+$5300
=$15900
Now,
Cost of Equipment in 2014 $41200
(-) Depreciation $15900
Book Value on 01/01/2014 $25300
(-) Salvage Value $ 2500
Depreciable Cost $22800
Depreciation Expense = $22800/4
=$5700
Entry;-
Depreciation Expense $5700
Accumulated Depreciation $5700
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