Machinery purchased for $71,400 by Pina Co. in 2013 was originally estimated to

Question

Machinery purchased for $71,400 by Pina Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of $4,760 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 $5,355 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.) Account Titles and Explanation Debit Credit LINK TO TEXT LINK TO TEXT 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.) Account Titles and Explanation Debit Credit

Explanation / Answer

original straight line depreciation:

(71,400 - 4,760)/8 = 8,330 per year

2013 to 2017, 5 years

depreciation = 8,330*5 = 41,650

book value at end of 2017:

71,400 - 41,650 = 29,750

depreciation 2018 (5 years left)

(29,750- 5,355)/5 = 4879

journal entry:

Debit: Depreciation expense 4879
Credit: Accumulated depreciation 4879

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