ezto.mheducation.com/hm.tpx | psGetting Started Imported From IE Imported From F

Question

ezto.mheducation.com/hm.tpx | psGetting Started Imported From IE Imported From Fire Domain Manager- D cheapDomanco Question 3 (of 5) velue 20.00 points Brief Exercise 20-4 Change in depreciation methods [LO20-3 Irwin, Inc., constructed a machine at a total cost of $79 milion. Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013. The machine was being depreciated over a 10-year life using the sum-of-the-years-digits method. The residual value is expected to be $2 million. At the beginning of 2016, Irwin decided to change to the straight-line method ignoring income taxes, prepare the journal entry relating to the machine for 2016. (if no entry is required for a transactionevent, select "No journal entry required" in the first account fheld. Enter o answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) View transaction list Journal entry worksheet Record the entry relating to the machine for 2016 cradits- General Journal Debit Credit Event TOSHIBA

Explanation / Answer

Exercise 20-4 Calculation of depreciation using sum of the years digits method Machine's depreciable value = Cost - residual value = $79 million - $2 million = $77 million The machine's useful life is 10 years , hence the sum of the years digits = 10(1+10)/2 = 55 Year Formula Depreciation 2013 =10/55*$77 million $14,000,000 2014 =9/55*$77 million $12,600,000 2015 =8/55*$77 million $11,200,000 Total $37,800,000 Calculation of depreciation using straight line method Depreciation per year = (Cost - residual value)/useful life = ($79 million - $2 million)/10 years = $77,00,000 Year Depreciation 2013 $7,700,000 2014 $7,700,000 2015 $7,700,000 Total $23,100,000 Extra depreciation charged to profit in sum of the digit depreciation = $3,78,00,000 - $2,31,00,000 = $1,47,00,000 This extra depreciation need to be reversed after change in depreciation method and pass the following journal entry at the beginning of year, Journal entry relating to machine for 2016 Date Account Titles Debit Credit Jan.1,2016 Accumulated depreciation $14,700,000 Retained Earnings $14,700,000 Exercise 20-5 Calculation of depreciation using sum of the years digits method Machine's depreciable value = Cost - residual value = $51 million - $3 million = $48 million The machine's useful life is 10 years , hence the sum of the years digits = 10(1+10)/2 = 55 Year Formula Depreciation 2013 =10/55*$48 million $8,727,273 2014 =9/55*$48 million $7,854,545 2015 =8/55*$48 million $6,981,818 Total $23,563,636 Calculation of depreciation using straight line method Depreciation per year = (Cost - residual value)/useful life = ($51 million - $3 million)/10 years = $48,00,000 Year Depreciation 2013 $4,800,000 2014 $4,800,000 2015 $4,800,000 Total $14,400,000 Less depreciation charged to profit in straight line depreciation method = $2,35,63,636 - $1,44,00,000 = $91,63,636 This less depreciation need to be charged to profit after change in depreciation method and pass the following journal entry at the beginning of year, Journal entry relating to machine for 2016 Date Account Titles Debit Credit Jan.1,2016 Retained Earnings $9,163,636 Accumulated Depreciation $9,163,636

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.