Question

For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2018 for $2,430,000. Its useful life was estimated to be six years, with a $246,000 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		$	364			$	810			$	446
2019			364				540				176
2020			364				360				(4	)
		$	1,092			$	1,710			$	618

Required:
2. Prepare any 2021 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. Enter your answers in whole dollars.)

Answer 1

Calculation of depreciation:

Particulars	Amount
Cost of asset	2,430,000
Less: Accumulated depreciation to date	1,710,000
Un depreciated cot, Jan 1	720,000
Estimated residual value	246,000
To be depreciated over remaining 3 years	474,000

Annual straight line depreciation = Depreciation value over remaining 3 years/Remaining years

= 474,000/3

= 158,000

Journal Entry:

Date	Particulars	Debit	Credit
	Depreciation expense	158,000
	Accumulated depreciation		158,000
	(To record adjusting depreciation)