Machinery purchased for $ 77,400 by Tom Brady Co. in 2010 was originally estimat
ID: 2453654 • Letter: M
Question
Machinery purchased for $ 77,400 by Tom Brady Co. in 2010 was originally estimated to have a life of 8 years with a salvage value of $ 5,160 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2015, it is determined that the total estimated life should be 10 years with a salvage value of $ 5,805 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.)
Prepare the entry to record depreciation for 2015. (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. Use Machinery related account.)
Explanation / Answer
Prepare the entry to correct the prior year's depreciation, if necessary.
No Entry
Prepare the entry to record depreciation for 2015
Working
Annual Depreciation earlier = (Cost- Salvage Value)/Useful life
Annual Depreciation earlier = (77400-5160)/8
Annual Depreciation earlier = 9030
Accumulated Depreciation till the end of 2014 = Annual Depreciation earlier* No of year lapsed
Accumulated Depreciation till the end of 2014 = 9030*5
Accumulated Depreciation till the end of 2014 = 45150
Book Value at the end of 2014 = Cost - Accumulated Depreciation till the end of 2014
Book Value at the end of 2014 = 77400-45150
Book Value at the end of 2014 = 32250
Revised Salvage Value = 5805
Remainning Useful life (revised) = 10-5
Remainning Useful life (revised) = 5
Depreciation for 2015 = (Book Value at the end of 2014 - Revised Salvage Value )/Remainning Useful life (revised)
Depreciation for 2015 = (32250-5805)/5
Depreciation for 2015 = $ 5289
Date Account Title & Explaination Debit Credit Dec 31 2015 Depreciation Expenses 5289 Accumulated Depreciation 5289Related Questions
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