Question

On January 1, 2017, Sage Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $49,200 salvage value, $828,000 cost Equipment, 12-year estimated useful life, $11,200 salvage value, $ 99,400 cost The building has been depreciated under the double-declining balance method through 2020. In 2021, the company decided to switch to the straight-line method of depreciation. Sage also decided to change the total useful life of the equipment to 9 years, with a salvage value of $4,400 at the end of that time. The equipment is depreciated using the straight-line method. Prepare the journal entry necessary to record the depreciation expense on the building in 2021.

Answer 1

To record the depreciation expense on the building for 2021 after switching to the straight-line method, we must calculate the adjusted annual depreciation. This would require the accumulated depreciation to date, which is not provided. The journal entry would debit Depreciation Expense and credit Accumulated Depreciation for the new depreciation amount.

Step-by-step explanation:

To prepare the necessary journal entry to record the depreciation expense on the building for the year 2021, following the change from the double-declining balance method to the straight-line method, we must first calculate the adjusted depreciation expense under the new method starting in 2021.

Calculating the Adjusted Depreciation

1. Determine the accumulated depreciation on the building up to the end of 2020 using the double-declining balance method.
2. Subtract the accumulated depreciation from the original cost to get the book value on January 1, 2021.
3. Deduct the salvage value from the book value to find the depreciable base.
4. Divide the depreciable base by the remaining useful life to calculate the annual straight-line depreciation expense for 2021 and onward.

Unfortunately, without the specific amounts of depreciation already taken under the double-declining balance method, we can't calculate the exact value of accumulated depreciation or the depreciated book value. Therefore, we're unable to provide a precise journal entry without this information.

However, once the adjusted annual depreciation is calculated, the journal entry would typically debit Depreciation Expense and credit Accumulated Depreciation for the calculated amount of the building's depreciation expense for 2021.