Wardell Company purchased a mini computer on January 1, 2016, at a cost of $46,8
ID: 2532878 • Letter: W
Question
Wardell Company purchased a mini computer on January 1, 2016, at a cost of $46,800. The computer has been depreciated using the straight-line method over an estimated five-year useful life with an estimated residual value of $4,800. On January 1, 2018, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $600. Required: 1. Prepare the appropriate adjusting entry for depreciation in 2018 to reflect the revised estimate. 2. Prepare the appropriate adjusting entry for depreciation in 2018 to reflect the revised estimate. Assuming that the company uses the sum-of-the-years-digits method instead of the straight-line method.Explanation / Answer
1) Original dep = (46800-4800/5) = 8400 per year
Accumlated dep = 8400*2 = 16800
2018 revised dep = (46800-16800-600)/8 = 3675
2) Sum of year digit = 5+4+3+2+1 = 15
Original Accumlated dep = (46800-16800)*9/15 = 18000
Sum of year digit after revision = 8+7+6+5+4+3+2+1 = 36
2018 dep = (46800-18000-600)*8/36 = 6267