Question

The Canliss Milling Company purchased machinery on January 2, 2014, for $820,000. A five-year life was estimated and no residual value was anticipated. Canliss decided to use the straight-line depreciation method and recorded $164,000 in depreciation in 2014 and 2015. Early in 2016, the company changed its depreciation method to the sum-of-the-years’-digits (SYD) method.

   

Required:

2.	Prepare any 2016 journal entry related to the change. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

     

Answer 1

Answer:

Sum-of-the-years’-digits method:

=(Cost – residual value) x (Declining years ÷ Sum of the years)

Cost = Book value in 2016:

[$820,000 – (2 x $164,000)]

= $492,000

Residual value = $0

Remaining life = 3 years (5 – 2)

Sum of the years

= [n x (n+1)] ÷ 2

= [3 x (3 + 1)] ÷ 2

= 6

SYD Depreciation

= $492,000 x (3 ÷ 6)

= $246,000

Prepare any 2016 journal entry related to the change

Now we will pass the Journal Entry as under

Account title and Description	Debit $	Credit $
Depreciation expense	246,000
Accumulated depreciation		246,000