Wardell Company purchased a minicomputer on January 1, 2016, at a cost of $46,00
ID: 2542645 • Letter: W
Question
Wardell Company purchased a minicomputer on January 1, 2016, at a cost of $46,000. The computer was depreclated using the stralght-Ine method over an estimated five-year life with an estimated resldual value of $7,000. On January 1, 2018, the estimate of useful life was changed to a total of 10 years, and the estimate of resldual value was changed to $1.000. Required: 1. Prepare the year-end journal entry fordepreclation In 2018. No depreclation was recorded during the year. 2 Prepare the year-end journal entry for depreclation In 2018. Assume that the company uses the sum-of-the-years' -digits method Instead of the straight-line methoo.Explanation / Answer
1) Straight line dep = (46000-7000/5) = 7800 per year
2016 to 2017 accumlated depreciation = 7800*2 = 15600
Straight line dep for 2018 = (46000-15600-1000)/8 = 3675
Journal entry :
2) Sum of year digit = 5+4+3+2+1 = 15
Depreciation 2016 = (46000-7000*5/15) = 13000
Depreciation 2017 = (46000-7000*4/15) = 10400
Accumlated depreciation = 13000+10400 = 23400
Dep for 2018 = (46000-23400-1000)*8/36 = 4800
Journal entry :
date accounts & explanation debit credit Dec 31, 2018 Depreciation expense 3675 Accumlated depreciation 3675