On Jan 01, 2016 Majad Corporation purchased assets that have the following usefu

Question

On Jan 01, 2016 Majad Corporation purchased assets that have the following useful lives, residual values, and costs. A building costing $10,859,000, with an estimated useful life of 30 years and a residual value of 6 $2,590,000. The building is depreciated using the Sum of Years Digits method. 8 Machinery costing $4,895,000 with an estimated useful life of 14 years and a $1,025,000 residual 9 value. The machinery is depreciated using the Sum of Years Digits method. 11 On Dec 31, 2025 Majad decided to make the following changes in estimates: 12 a) Building useful life has changed to 25 years and the residual value to 2,590,000 13 The depreciation method is changed to Straight Line method. 14 b) The Machinery has changed to Double Declining Balance depreciation method. 15 16 Machinery useful life has changed to 20 years and the residual value to 1,250,000. 17 REQUIRED 18 a) Prepare the journal entry necessary to record the depreciation expense on the building 19 on Dec 31, 2025 20 b) Prepare the joumal entry necessary to record the depreciation expense on the machinery 21 on Dec 31, 2025 22 Date General Journal Debit Credit

Explanation / Answer

Workings

Excess depreciation has been chrged under sum of years method. If SLM has been used, the WDV on 31 Dec 2025 would be 7551400. Actual WDV is 6324387. Hence an amount of 7551400-6324387 = 1227012 needs to be written back toBuilding Account.

Note;

Accuulated depreciation account has not been considered here.

Since only the information on building is highlighted, the calculation forbuilding only is done here.

Particulars Debit Credit Depreciation 373438.71 Building 373438.71 (Original Depreciation) Building 1227012.903 P&L 1227012.903 (Excess Depreciationrecorded these yers written back)

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