Exercise 11-11 (Part Level Submission) Machinery purchased for $61,800 by Marigo

Question

Exercise 11-11 (Part Level Submission) Machinery purchased for $61,800 by Marigold Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of $4,120 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2018, it is determined that the total estimated life should be 10 years with a salvage value of $4,635 at the end of that time. Assume straight-line depreciation Prepare the entry to correct the prior year's depreciation, if necessary. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanatiorn Debit Credit Click if you would like to Show Work for this question pen Show Work

Explanation / Answer

There will be no entry for prior years depreciation.

This is a case of change in accounting estimates. Change in accounting estimates must be accounted for prospectively. Previous year's depreciatioon is not affected by it and no adjustments will be made to previous year's depreciation. Revised depreciation will be calculated as follows

Original Cost (A) 61800 Estimated Salvage value (B) 4120 Depreciation basis (C=A-B) 57680 Life in years (D) 8 Depreciation (E=C/D) 7210 Accumlated Depreciation (F=E*5) 36050 Book Value (G=A-F) 25750 Revised Salvage value (H) 4635 Depreciation basis (I=G-H) 21115 Remaining useful life in years (J=10-5) 5 Revised Depreciation (K=I/J) 4223

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.