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22 December, 14:58

Mendrisio Company purchased a piece of machinery for $30,000 on January 1, 2019, and has been depreciating the machine using the sum-of-the-years'-digits method based on a five-year estimated useful life and no salvage value. On January 1, 2021, Mendrisio decided to switch to the straight-line method of depreciation. The salvage value is still zero and the estimated useful life is changed to a total of six years from the date of purchase. Ignore income taxes.

Requirements:

a. Prepare the appropriate journal entry (if any) to record the accounting change (include the account and the dollar amount; no abbreviations!)

b. Prepare the journal entry to record depreciation for 2018.

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Answers (1)
  1. 22 December, 15:22
    0
    a. There is no entry required to record the accounting change

    b. The journal entry to record depreciation for 2021 would be as follows:

    Debit Credit

    Depreciation Expense $3,000

    Accumulated Depreciation $3,000

    Explanation:

    According to the given data we have the following:

    Sum of year digits=5 (5+1) / 2

    Sum of year digits = (5*6) / 2

    Sum of year digits=15

    Depreciation for year 2019=$30,000*5/15

    Depreciation for year 2019=$10,000

    Depreciation for year 2020=$30,000*4/15

    Depreciation for year 2020=$8,000

    Therefore, book value as on january 1, 2021=$30,000-$10,000-$8,000

    book value as on january 1, 2021=$12,000

    Revised useful life=6 years-2 years=4 years

    Therefore, Revised depreciation for 2021=$12,000/4

    Revised depreciation for 2021=$3,000

    a. There is no entry required to record the accounting change

    b. The journal entry to record depreciation for 2021 would be as follows:

    Debit Credit

    Depreciation Expense $3,000

    Accumulated Depreciation $3,000
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