Do Homework- Kathi Wagner - Google Chrome Secure https /www.mathol.com Student P
ID: 2579399 • Letter: D
Question
Do Homework- Kathi Wagner - Google Chrome Secure https /www.mathol.com Student PlayerHomework.aspxhomeworkIde43324788SAquestionisalstede a selde45xonee cente n ACC 215S Intermediate Accounting ll Fall 17 Kathi Wagner 11/25/17 2 31 PM 0 Homework: Chapter 21 Homework Score: 0 of 10 pts E21-6 (book/static) Save 2012(1 complete) HW Score: 14 58%, 292 of 20 pts til Question Help * Hi-Lo Corporation elected to change its method of depreciation from the double-declining balance method to the straight-line method at the beginning of the current year It acquired the e uc ent two years ago on January 1 530 000 The ongnal estmated useful ife was tve years with an ongnal scrap value of S18,000 The co panys su ect to a 40% ncome tax rate Requirements ora. Prepare the journal entry to record the change in depreciation method nt b. Draft a footnote disclosure for the change in depreciation method cude explanations from any journal entries.) pts December 31, Current Year Account what t urse (AQ ght 2017 Choose from any list or enter any number in the input fields and then click Check Answer Check Answer Clear All 1 PemainingExplanation / Answer
Requirement a
Working :
Depreciation as per Double Decline Balance (DDB) : (1/ estimated useful life ) * 2 *WDV of asset at the beginning of year
Depreciation as per DDB for Year 1 : (1/ 4 ) * 2* $300,000 = $150,000
Depreciation as per DDB for Year 2 : (1/ 4 ) * 2* $150,000 = $75,000
WDV of the equipment at the beginning of the current year ( $300,000 - $150,000 - $75,000) = $75,000.
New Depreciation per annum as per SLM :
WDV of the equipment at the beginning of the current year - Scrap Value / Remaining Estimated useful life.
( $75,000 - $18,000 ) / 2 years = $28,500
Journal Entries
Requirement b
Draft footnote discloser on change in method of depreciation :
With effect from the beginning of the current year , the company changed its method of depreciation from Double - decline method to straight line method , as the management is in the view that such change in method of depreciation will better reflect the income flow from the equipment under consideration.
The estimated useful life and the scrap value of the equipment remains unchanged. Such change in method of depreciation is reported propectively.
The effect of this change will reduce the depereciation expenses for the year to $28,500 from $37,500 , thus increasing the net income for the year ended on December , 31 by $9,000.
Accounts December 31 , Current Year ($) Depreciation Expense - Equipment $28,500 Accumulated Depreciation—Equipment $28,500 ( To record deperation expense of the current year )Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.