Turner Corporation elected to change its method of depreciation from the double-

Question

Turner Corporation elected to change its method of depreciation from the double-declining balance method to the straight-line method at the beginning of the current year. It acquired the equipment two years ago on January 1 for $310,000. The original estimated useful life was ten years with an original scrap value of 533,000. The company is subject to a 40% income tax rate. Requirements a. Prepare the journal entry to record the change in depreciation method. b. Draft a footnote disclosure for the change in depreciation method Requirement a. Prepare the joumal entry to record the change in depreciation method. (Record debits first, then credits. Exclude explanations from any journal entries.) December 31, Current Year Account

Explanation / Answer

Accumulated Depreciation-Equipment Dr. 56200        Tax payable 22480         Retained earnings 33720 Note: Depreciation under DDM: Cost of assets 310,000 Less: Dep@20% 62000 Book vakue at end of first year 248,000 Less: Dep @20% 49600 Book value at end of 2nd year 198,400 Total dep (62000+49600) = 111600 Total Dep as per SLM for two yeears 55400 (310000-33000)/10 *2 years Excess depreciation charged 56200 Less: Tax liability increased @40% 22480 Net Income increase 33720

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