Machinery purchased for $63,600 by Novak Co. in 2013 was originally estimated to
ID: 2518224 • Letter: M
Question
Machinery purchased for $63,600 by Novak Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of $4,240 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 $4,770 at the end of that time. Assume straight-line depreciation.
(a)
Account Titles and Explanation
Debit
Credit
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(b)
Account Titles and Explanation
Debit
Credit
(a)
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.)Account Titles and Explanation
Debit
Credit
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Explanation / Answer
Cost = 63,600
Useful life = 8 years
Salvage value = 4,240
Depreciation under Straight line method = (cost - salvage value) / useful life
= (63,600 - 4,240) / 8
= 7,420
Accumulated depreciation for 5 years at the beginning of 2018 = 7,420 * 5 = 37,100
Carrying value of Machinery at the beginning of 2018 = Cost - Accumulated depreciation
= 63,600 - 37,100
= 26,500
Revised useful life = 10 years
Remaining useful life = 10 - 5 = 5 years
Revised salvage value = 4,770
Depreciation per year from 2018 = (carrying value - revised salvage value) / remaining useful life
= (26,500 - 4,770) / 5
= 4,346
(a)
No entry
(change has to be accounted prospectively)
(b)
Depreciation expense 4,346 Accumulated depreciation 4,346Related Questions
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