Exercise 22-8
Flounder 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.)
Account Titles and Explanation | Debit | Credit | |
(a) | |||
(b) | |||
1) Equipment depreciable base = 515800-14800 = 501000
Sum of year digit = 5+4+3+2+1 = 15
Accumlated depreciation = 501000*12/15 = 400800
2018 Depreciation expense = (501000-400800/2) = 50100
Building depreciation expense = 642000/30 = 21400 per year
accumlated depreciation = 21400*3 = 64200
2018 Depreciation expense = (642000-64200/37) = 15616
Journal entry
No | Account and explanation | debit | credit |
a | Depreciation expense | 50100 | |
Accumlated depreciation-equipment | 50100 | ||
(To record dep) | |||
b | Depreciation expense | 15616 | |
Accumlated depreciation-Building | 15616 | ||
(To record dep) |
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