 Business
22 April, 20:45

# Machinery purchased for \$63,000 by Concord Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of \$4,200 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2021, it is determined that the total estimated life should be 10 years with a salvage value of \$4,725 at the end of that time. Assume straight-line depreciation.Required:1. Prepare the entry to correct the prior years' depreciation, if necessary.2. Prepare the entry to record depreciation for 2021.

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1. 22 April, 22:09
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Correction entry.

1. Credit accumulated depreciation \$7612.50

Debit Asset/machinery \$7612.50

2. Credit Asset / Machinery \$5827.5

Debit Accumulated depreciation \$5827.50

Explanation:

Cost of machine = \$63000

Useful life = 8yrs

Salvage value = \$ 4200

Depreciable amount on this basis \$ (63000-4200) = 58800

Annual depreciation = 58800/8 = 7350

5yrs depreciation = 7350 * 5=\$36750.

Revised Useful life - 10yrs

Revised Salvage value = \$4725

Revised depreciable amount = \$58275

Annual depreciation = 58275/10 = \$5,827.50

5yrs depreciation = \$29,137.50

Difference in accumulated depreciation = \$36750-\$29137.5

\$7612.50