Question

Granzatto, Inc. acquired the following assets in January 2015:
Equipment, estimated service life, 5 years; no salvage value $650,000
Building, estimated service life, 40 years; salvage value, $500,000 $5,500,000
The equipment has been depreciated using the double-declining balance method
for the first 2 years for financial reporting purposes. In 2017, the company decided
to change the method of computing depreciation to the straight-line method for the
equipment, but no change was made in the estimated service life or salvage value.
It was also decided to change the total estimated service life of the building from
40 years to 35 years, with no change in the estimated salvage value. The building is
depreciated on the straight-line method.
Required
(a) Prepare the general journal entry to record depreciation expense for the
equipment in 2017.
(b) Prepare the journal entry to record depreciation expense for the building in
2017.

Answer 1

Equipment:

Depreciation rate = 100/5*2 = 40%

First year dep = 650000*40% = 260000

Second year dep = 650000*60%*40% = 156000

Accumulated dep = 260000+156000 = $416000

2017 Depreciation = (650000-416000/3) = 78000

Building :

Original dep = (5500000-500000/40) = 125000 per year

Accumulated dep = 125000*2 = 250000

2017 Dep = (5500000-500000-250000)/33 = 143939

Journal entry

Date	account and explanation	debit	credit
2017	Depreciation expense	78000
	Accumulated depreciation-equipment		78000
	(To record dep)

Journal entry

Date	account and explanation	debit	credit
2017	Depreciation expense	143939
	Accumulated depreciation-Building		143939
	(To record dep)