P11-14 Changes and Corrections of Depreciation During 2010, the controller of th

Question

P11-14 Changes and Corrections of Depreciation During 2010, the controller of the Ryel Company asked you to prepare
correcting journal entries for the following three situations:
1. Machine A was purchased for $50,000 on January 1, 2005. Straight-line depreciation has been recorded for five years,
and the Accumulated Depreciation account has a balance of $25,000. The estimated residual value remains at $5,000,
but the service life is now estimated to be one year longer than estimated originally.
2. Machine B was purchased for $40,000 on January 1, 2008. It had an estimated residual value of $5,000 and an estimated
service life of 10 years. It has been depreciated under the double-declining-balance method for two years. Now, at the
beginning of the third year, Ryel has decided to change to the straight-line method.
3. Machine C was purchased for $20,000 on January 1, 2009. Double-declining-balance depreciation has been recorded for
one year. The estimated residual value of the machine is $2,000 and the estimated service life is five years. The computation
of the depreciation erroneously included the estimated residual value.
Required
Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation
to record the depreciation for 2010. (Assume that the debit is to Depreciation Expense.)

Explanation / Answer

2005 Machine A 50,000 Cash 50000 Machine A is purchased 2008 Machine B 40000 Cash 40000 Purchase of the Machine B 2009 Machine C 20000 Cash 20000 Purchase of the Machine C 2010 Depreciation Expense 4000 Accumulated Depreciation - Machine A 4000 Depreciation Expense 2575 Accumulated Depreciation - Machine B 2575 Retained Earnings 800 Accumulated Depreciation - Machine C Depreciation Expense 4800 Accumulated Depreciation - Machine C 4800

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