•In 20X0, ABC company purchased machine for $300,000 that had a useful life of 5
ID: 2670057 • Letter: #
Question
•In 20X0, ABC company purchased machine for $300,000 that had a useful life of 5 years, with a salvage value of $50,000 at the end its life. Depreciation was calculated over 2 years on straight-line basis. In 20X2, it determined that the total life should be 10 years with the salvage value of $5,000 at the end its life.?Prepare the entry to correct the depreciation for 20X1.
?Prepare the entry to record the depreciation for 20X2.
These are my calculations please show me the journal entries I should make according to the above instructions.
Begining book value 300,000
20x0 and 20X1 Depreciation expense 50,000
Accum. Depreciation 100,000
Book Value at end of 2 years 150,000
20X2 Depreciation expense 18,125
Accum. Depreciation 118,125
Book Value at ended of year 131,875
Explanation / Answer
In 20x0, Cost of machine =300,000, Salvage=50000, Life 5 yrs So Dep using SLN = (Cost-Salvage)/life = (300,000-50000)/5 = 50,000 pa So Dep charged for yrs 20x0 & 20x1 = 50000+50000 = 100,000 Dep already charged cant be reversed if books are closed. So Dep for 20x1 is 50000..Ans(1) In 20X2, Accumulated Dep = 100,000. Life is 10 yrs of which 2 yr is already over. So Bal life is 8 yrs. So New Dep rate = (Cost of machine - Accum Dep - new salvage)/New life ie New Dep rate = (300000-100000-5000)/8 =24375 31 Dec 20X2 Dep exp Dr 24375 Accum Dep Cr 24375
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