Question

Machinery purchased for $69,000 by Vaughn Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,600 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 $5,175 at the end of that time. Assume straight-line depreciation.

Prepare the entry to correct the prior years' depreciation, if necessary. (If no entry is required, select "No entry"for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation Debit Credit
List of Accounts
Prepare the entry to record depreciation for 2021. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Use Machinery related account.)
Account Titles and Explanation Debit Credit

Answer 1

Prepare the entry to correct the prior years' depreciation, if necessary.

any change in depreciation expense must be done for future events, past events cannot be adjusted

Depreciation expense 2021:

carrying value December 2020 = $69,000 - {[($69,000 - $4,600) / 8] x 5} = $69,000 - $40,250 = $28,750

depreciation expense per year (including 2021) = ($28,750 - $5,175) / 5 = $4,715