Instructions Bailand Company purchased a building for $210,000 that had an estim
ID: 2337589 • Letter: I
Question
Instructions Bailand Company purchased a building for $210,000 that had an estimated residual value of $10,000 and an estimated service life of 10 years. Bailand purchased the building 4 years ago and has used straight-line depreciation. At the beginning of the fifth year (before it records depreciation expense for the year), the following independent situations occur: 1. Bailand estimates that the asset has 8 years' life remaining (for a total of 12 years) 2. Bailand changes to the sum-of-the-years'-digits method. 3. Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense Required: For each of the independent situations, prepare all the journal entries relating to the building for the fifth year. Ignore income taxes.Explanation / Answer
Straight line depreciation expense = (210000-10000/10) = 20000 per year
Accumlated depreciation for fourth year = 20000*4 = 80000
Sum of year digit = 6+5+4+3+2+1 = 21
Journal entry :
No Account and explanation debit credit 1 Depreciation expense (210000-10000-80000)/8 15000 Accumlated depreciation-Building 15000 (To record depreciation expense) 2 Depreciation expense (210000-10000-80000)*6/21 34286 Accumlated depreciation-Building 34286 (To record depreciation expense) 3 Depreciation expense (210000-80000)/6 21667 Accumlated depreciation-Building 21667 (To record depreciation expense)