On January 1, 2010, Powell Company purchased a building andmachinery that have the following useful lives, salvage value, andcosts.
Building, 25-year estimated useful life, $6,000,000 cost,$600,000 salvage value
Machinery, 10-year estimated useful life, $800,000 cost, nosalvage value
The building has been depreciated under the straight-line methodthrough 2014. In 2015, the company decided to switch to thedouble-declining balance method of depreciation for the building.Powell also decided to change the total useful life of themachinery to 8 years, with a salvage value of $40,000 at the end ofthat time. The machinery is depreciated using the straight-linemethod.
Instructions
(a) Prepare the journalentry necessary to record the depreciation expense on the buildingin 2015.
(b) Compute depreciationexpense on the machinery for 2015.
On January 1, 2010, Powell Company purchased a building andmachinery that have the following useful lives, salvage value, andcosts.
Building, 25-year estimated useful life, $6,000,000 cost,$600,000 salvage value
Machinery, 10-year estimated useful life, $800,000 cost, nosalvage value
The building has been depreciated under the straight-line methodthrough 2014. In 2015, the company decided to switch to thedouble-declining balance method of depreciation for the building.Powell also decided to change the total useful life of themachinery to 8 years, with a salvage value of $40,000 at the end ofthat time. The machinery is depreciated using the straight-linemethod.
Instructions
(a) Prepare the journalentry necessary to record the depreciation expense on the buildingin 2015.
(b) Compute depreciationexpense on the machinery for 2015.
Related questions
Flounder Company is in the process of preparing its financialstatements for 2017. Assume that no entries for depreciation havebeen recorded in 2017. The following information related todepreciation of fixed assets is provided to you.
1)Flounder purchased equipment on January 2, 2014, for $76,900.At that time, the equipment had an estimated useful life of 10years with a $4,900 salvage value. The equipment is depreciated ona straight-line basis. On January 2, 2017, as a result ofadditional information, the company determined that the equipmenthas a remaining useful life of 4 years with a $3,100 salvagevalue. | ||
| 2)During 2017, Flounder changed from thedouble-declining-balance method for its building to thestraight-line method. The building originally cost $280,000. It hada useful life of 10 years and a salvage value of $28,000. Thefollowing computations present depreciation on both bases for 2015and 2016. |
2016 | 2015 | |||
| Straight-line | $25,200 | $25,200 | ||
| Declining-balance | 44,800 | 56,000 |
| 3)Flounder purchased a machine on July 1, 2015, at a cost of$110,000. The machine has a salvage value of $16,000 and a usefullife of 8 years. Flounderâs bookkeeper recorded straight-linedepreciation in 2015 and 2016 but failed to consider the salvagevalue. Prepare the journal entries to record depreciation expense for2017 and correct any errors made to date related to the informationprovided. (Ignore taxes.) (Credit account titles areautomatically indented when amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts.) Show comparative net income for 2016 and 2017. Income beforedepreciation expense was $280,000 in 2017, and was $310,000 in2016. (Ignore taxes.) |
