Annual depreciation expense on equipment purchased a few years ago (using the st

Question

Annual depreciation expense on equipment purchased a few years ago (using the straight-line method) is $5,000. The cost of the equipment was $100,000. The current book value of the equipment (Jan 1, 2013) is $85,000. At the time of purchase, the asset was estimated to have zero salvage value. On Jan1, 2013 the company decided to reduce the original useful life by 25% and to establish a salvage value of $5,000. The firm also decided double-declining balance depreciation was more appropriate. Ignore tax effects.

Required:

1. Record the journal entry, if any, to report the accounting change.

2. Record the annual depreciation for 2013.

Explanation / Answer

Annual depreciation expense on equipment purchased a few years ago (using the st

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