Question

For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment...

For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2018 for $2,880,000. Its useful life was estimated to be six years with a $240,000 residual value. At the beginning of 2021, Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows: ($ in thousands) Year Straight-Line Declining Balance Difference 2018 $ 440 $ 960 $ 520 2019 440 640 200 2020 440 427 (13 ) $ 1,320 $ 2,027 $ 707 Required: 2. Prepare any 2021 journal entry related to the change. (Enter your answers in dollars rounded to the nearest thousand. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Homework Answers

Answer #1
Journal Entry- Clinton Poultry
Date Account Tittl Debit Credit
31/12/2018 Depreciation Expense $204,333.33
Accumulated Depreciation $204,333.33
Working Note
Cost of the Asset $2,880,000.00
Accumulated Depreciation as on 31/12/2017 -$2,027,000.00
Book Value on 01/12/2018 $853,000.00
Less: Residual Value -$240,000.00
Depreciable Value on 01/12/2018 $613,000.00
Remaining Useful Life( 6-3) 3 Year
Annual Depreciation as per SLM ( 613000/3) $204,333.33
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