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ID: 2417887 • Letter: 2
Question
2013
2012
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(a)
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Account Titles and Explanation
Debit
Credit
(To record current year depreciation.)
(To correct prior year depreciation.)
Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you.1. Holtzman purchased equipment on January 2, 2011, for $94,300. At that time, the equipment had an estimated useful life of 10 years with a $5,300 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,300 salvage value. 2. During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $400,000. It had a useful life of 10 years and a salvage value of $26,000. The following computations present depreciation on both bases for 2012 and 2013.
2013
2012
Straight-line $37,400 $37,400 Declining-balance 64,000 80,000 3. Holtzman purchased a machine on July 1, 2012, at a cost of $150,000. The machine has a salvage value of $10,000 and a useful life of 8 years. Holtzman’s bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value.Warning
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Explanation / Answer
1)Deprectiation in 2014 = $94,300 - (8900*3 Depreciation charged uptill now ) - 2,300/4 = $16,325
2)Book value 400,000 - (64,000 +80000) = $256,000
Depreciation under straight line = (256,000- 26,000)/8 = $28,750
3) Depreciation charge 150,000/8 = $18,750
Should be charged (150,000- 10,000)/8 = 17,500
Overcharge = 18,750 - 17,500 = $1,250
Debit Credit Depreciation expense $16,325 To Accumulated depreciation $16,325Related Questions
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