Wardell Company purchased a mini computer on January 1, 2014, at a cost of $42,5
ID: 2471209 • Letter: W
Question
Wardell Company purchased a mini computer on January 1, 2014, at a cost of $42,550. The computer has been depreciated using the straight-line method over an estimated five-year useful life with an estimated residual value of $4,300. On January 1, 2016, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $930.
Prepare the appropriate adjusting entry for depreciation in 2016 to reflect the revised estimate. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Prepare the appropriate adjusting entry for depreciation in 2016 to reflect the revised estimate. Assuming that the company uses the sum-of-the-years'-digits method instead of the straight-line method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Required:Explanation / Answer
Journal Entry Straight Method 1 31-12-2016 Depriciation Expenses A/C Dr. 3,290.00 To Accumalated Depriciation 3,290.00 Analyze of revised depriciation Expenses original Cost 42550 Orginal Salvage value 4300 Depriciable base 38250 original Salvage Life in Yrs 5 Annual Depriciation 7650 Years in service before changes Estimates 2 Accumulated Depriciation 15300 Book Value (42550-15300) (01.01.2016) 27250 Revised Salvage Value 930 Depriciable base 26320 Revised Service Life (10-2) 8 Revised Annual Depriciation 3290 Sum of Digit Method 2 31-12-2016 Depriciation Expenses A/C Dr. 4,148.89 To Accumalated Depriciation 4,148.89 Analyze of revised depriciation Expenses original Cost 42550 Orginal Salvage value 4300 Depriciable base 38250 original Salvage Life in Yrs 5 Depriciation for 2014 (38250*5/15) 12750 Depriciation for 2015 ((38250*4/15) 10200 Accumulated Depriciation 22950 Book Value (42550-12750-10200) (01.01.2016) 19600 Revised Salvage Value 930 Depriciable base 18670 Revised Service Life (10-2) 8 Depriciation for 2016 (18670*8/36) 4,148.89