Holtzman Company is in the process of preparing its financial statements for 201

Question

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 $69,900. At that time, the equipment had an estimated useful life of 10 years with a $5,900 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 $2,100 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 $500,000. It had a useful life of 10 years and a salvage value of $39,000. The following computations present depreciation on both bases for 2012 and 2013. 2013 2012 Straight-line $46,100 $46,100 Declining-balance 80,000 100,000 3. Holtzman purchased a machine on July 1, 2012, at a cost of $130,000. The machine has a salvage value of $20,000 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. Collapse question part (a) Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit 1. 2. 3. (To record current year depreciation.) (To correct prior year depreciation.)

Explanation / Answer

1) Original cost 69900 salvage value 5900 Useful life 10 years depriciation pa ( 69900-5900)/10 6400 depriciation charged for 3 years 19200 WDV 44800 Original cost 69900 revised salvage value 2100 Useful life 4 years depriciation pa ( 69900-5900)/10 16950 depriciation charged for 3 years 50850 WDV 16950 Additional depriciation to be charged till 2nd Jan 2014 31650 Additional depriciation for 2014 16950 Total revised depriciation for 2014 48600 Journal entry Depriciation - Equipment Dr 48600            Accumulated depriciation - equipment Cr 48600 2) Depriciation charged 2013 2012 Total Straight line 46100 46100 92200 double declining 80000 100000 180000 Additional charged 33900 53900 87800 Depriciation to be charged for 2014 (SLM) 46100 46100 Additional depriciation to be reversed 41700 Accumulated depriciation - Building Dr 41700              Depriciation - Building Cr 41700 3) Cost of the machine 130000 salvage vbalue 20000 useful life 8 years depriciation recorded (without salvage) pa 16250 depriciation recorded (without salvage) 2 years 32500 correct depriciation ( with salvage) pa 13750 correct depriciation ( with salvage) 2 years 27500 Additional depriciation charged 5000 Depriciation for 2014 13750 Additional depriciation to be charged in 2014 8750 Depriciation - machine Dr 8750                  Accumulated depriciation - machine Cr 8750

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