Sheffield Cole Inc. acquired the following assets in January of
2015.
Equipment, estimated service life, 5 years; salvage value, $ 14,800 | $ 515,800 | |
Building, estimated service life, 30 years; no salvage value | $ 642,000 |
The equipment has been depreciated using the
sum-of-the-years’-digits method for the first 3 years for financial
reporting purposes. In 2018, 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 30 years to 40 years, with no
change in the estimated salvage value. The building is depreciated
on the straight-line method.
(a) | Prepare the general journal entry to record depreciation expense for the equipment in 2018. | |
---|---|---|
(b) | Prepare the journal entry to record depreciation expense for the building in 2018. |
(Round answers to 0 decimal places, e.g. 125. 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.)
NO. | Account Title and Explanation | Debit | Credit |
A | |||
B | |||
a) Book value as on starting of 2018
depreciaible cost=(cost-salvage)
=(515800-14800)=501000
for first 3years the depreciation is
=((5/15)+(4/15)+(3/15))*501000=400800
Book value at end of 3 years=501000-400800=100200
Deprecaition=(cost-salvage)/years
=(100200-14800)/2
=42700
depreciation expense equipment(db)42700
accumlated depreciaiton equipment (Cr)42700
b)depreciation normal=642000/30=21400
for first 3 years total depreciaiton=21400*3=64200
Book value =642000-64200=577800
Now the depreciaiton=577800/37 (since 3 years is already
passed)=15616
Depreciaiton expense building(db)15616
accumlated depreciaiton building (Cr)15616
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