Please Show Work Thank you! Exercise 11-22 Change in estimate; useful life and r

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Please Show Work Thank you!

Exercise 11-22 Change in estimate; useful life and residual value of equipment [L011-2, 11-5] Wardell Company purchased a minicomputer on January 1, 2016, at a cost of $52,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $7,000. On January 1, 2018, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $1,600. Required 1. Prepare the year-end journal entry for depreciation in 2018. No depreciation was recorded during the year 2. Prepare the year-end journal entry for depreciation in 2018. Assume that the company uses the sum-of-the-years' -digits method instead of the straight-line method.

Explanation / Answer

1) Calculation of new annual depreciation in 2018 (Amount in $)

Journal Entry for 2018 (Amount in $)

2) On the basis of Sum-of-the-year digits method

Calculation of new annual depreciation in 2018 (Amount in $)

Journal Entry for 2018 (Amount in $)

Cost 52,000 Less: Old Annual Depreciation for 2 years [(52,000-7,000)*2/5] (18,000) Book Value 34,000 Less: Revised Residual Value (1,600) Revised Depreciable base (A) 32,400 Estimated Remaining life (10 yrs - 2 yrs) (B) 8 yrs New Annual Depreciation (A/B) 4,050

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