Machinery purchased for $60,600 by Cheyenne Co. in 2013 was originally estimated

Question

Machinery purchased for $60,600 by Cheyenne Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of $4,040 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2018, it is determined that the total estimated life should be 10 years with a salvage value of $4,545 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 2018. (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

Machinery (60600-4040)/8 7070 Depreciation for 5 years = 7070*5= 35250 year 2018 original cost 60,600 less:Accumulated depreciation 35,250 book value after 5 years 25,350 less:revised salvage value -4,545 amount to be depreciated 20,805 Remaining useful life (10-5) 5 Depreciation expense 4161 journal Entry Accounting titles & Explanations Debit Credit prior years depreciation-correction entry 0 No entry 0 Depreciation expense 2018 Depreciation expense. 4,161 Accumulated depreciation 4,161

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