Question

Pina, Inc. changed depreciation methods in 2017 from straight-line to double-declining-balance. Depreciation prior to 2017 under straight-line was $101,000, whereas double-declining-balance depreciation prior to 2017 would have been $153,400. Pina’s depreciable assets had a cost of $383,500 with a $30,000 salvage value, and a 5-year remaining useful life at the beginning of 2017. Prepare the 2017 journal entries, if any, related to Pina’s depreciable assets.

Answer 1

Solution

Journal entry

Account title	debit	credit
Depreciation expense Accumulated depreciation (to record depreciation expense)	$113,000 . .	. $113,000 .

Carrying value = cost of asset - accumulated depreciation

= $383,500 - $101,000

= $282,500

Under double declining balance method,

Depreciation per annum = 2 x straight line depreciation percentage x book value at the beginning of period

where,

Straight line depreciation percentage = 100%/useful life = 100%/5 = 20%

Book value in the beginning = $282,500

Therefore,

For year 2017:

Depreciation expenses = 2 x 20% x $282,500 = $113,000