Novak Cole Inc. acquired the following assets in January of 2015. Equipment, est

Question

Novak Cole Inc. acquired the following assets in January of 2015. Equipment, estimated service life, 5 years; salvage value, $14,300 Building, estimated service life, 30 years; no salvage value $495,800 $702,000 The equipment has been depreciated using the sum-of-the-years'-digits method for the first 3 years for financial reporting purposes. In 2018, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method. (a) (b) Prepare the general journal entry to record depreciation expense for the equipment in 2018. Prepare the journal entry to record depreciation expense for the building in 2018. (Round answers to decimal places, e.g. 125. 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 itles and enter O for the amounts.) No. Account Titles and Explanation Debit Credit

Explanation / Answer

Journal entry :

Sum of year digit = 5+4+3+2+1 = 15

(2015 to 2017) Accumlated Depreciation = (495800-14300*12/15) = 385200

2018 depreciation = (495800-14300-385200)/2 = 48150

Building dep = 702000/30 = 23400 per year

2015 to 2017 accumlated dep = 23400*3 = 70200

2018 dep = 702000-70200/37 = 17076

Date accounts & explanation debit credit (a) Depreciation expense-equipment 48150 Accumlated depreciation-equipment 48150 (b) Depreciation expense-Building 17076 accumlated depreciation-Building 17076

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