The Canliss Milling Company purchased machinery on January 2, 2014, for $960,000
ID: 2477932 • Letter: T
Question
The Canliss Milling Company purchased machinery on January 2, 2014, for $960,000. A five-year life was estimated and no residual value was anticipated. Canliss decided to use the straight-line depreciation method and recorded $192,000 in depreciation in 2014 and 2015. Early in 2016, the company changed its depreciation method to the sum-of-the-years’-digits (SYD) method.
Prepare any 2016 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.)
Record entry to correct error?
Required:Explanation / Answer
Sum-of-the-years’-digits method: (Cost – residual value) x (Declining years ÷ Sum of the years) Book value in 2016 =(960000-192000*2) =576000 Remaining life=3 Sum of the years = [n x (n+1)] ÷ 2 = [3 x (3 + 1)] ÷ 2 = 6 Or 3+2+1 =6 SYD Depreciation = 576000*(3/6) =288000 DR CR Depreciation expense 288000 Accumulated depreciation 288000