Question

at the beginning of 2019, robotics inc. acquired a manufacturing facility for $13.2 million. $10.2 million of the purchase price was allocated to the building. depreciation for 2019 and 2020 was calculated using the straight-line method, a 25-year useful life, and a $2.2 million residual value. assume that 2019 depreciation was incorrectly recorded as $32,000. this error was discovered in 2021. required 1. record the journal entry needed in 2021 to correct the error. 2. what is depreciation on the building for 2021 assuming no change in estimate of useful life or residual value?

Answer 1

Answer:
1. The journal entry needed in 2021 to correct the error in depreciation recorded in 2019 is:

Debit Depreciation Expense (building) $18,000

Credit Accumulated Depreciation (building) $18,000

This entry increases Depreciation Expense by $18,000 for 2019 (the amount that was under-recorded), and decreases Accumulated Depreciation by the same amount.

2. Assuming no change in estimate of useful life or residual value, the depreciation on the building for 2021 would be $408,000 ($10.2 million - $2.2 million residual value, divided by 25 years). This is calculated using the straight-line method, which allocates the depreciable cost of the building evenly over its useful life.

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