Question

Machinery purchased for $68,400 by Metlock Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of $4,560 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2018, it is determined that the total estimated life should be 10 years with a salvage value of $5,130 at the end of that time. Assume straight-line depreciation.

Prepare the entry to correct the prior year's depreciation, if necessary. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the entry to record depreciation for 2018. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Use Machinery related account.)

Answer 1

Computation of Depreciation			Journal Entry for 2018
Particular	Amount		Account Tittle & Explanation	Debit	Credit
Original Cost	$68,400		Depreciation Expenses	$4,788
Less: Salvage value	$4,560		Accumulated Depreciation		$4,788
Depreciable value	$63,840		(To record depreciation for the year 2008)
Life	8 year
Depreciation per year($63840 ÷ 8)	$7,980
Depreciation for first five years ($7980 x 5)	$39,900
Book Value in the beginning of 2018 ($68,400 - $39900)	$28,500
After reconsideration it is determined that
Remaining life	5 Year
Revised Depreciable Value ($28500– $4560)	$23,940
Depreciation per year ($23940/5)	$4,788