Final answer:
The student's question about accounting requires adjusting the accumulated depreciation for a piece of equipment after a change in the estimated useful life and salvage value. The downward adjustment is calculated by comparing the new and old amounts of accumulated depreciation and making a journal entry to correct it.
Step-by-step explanation:
The question involves calculating and adjusting depreciation expenses for a piece of equipment in the context of accounting, which is a business topic. It is aimed at a high school grade level because it deals with accounting principles that are often introduced in high school business courses.
The original depreciation expense per year would be calculated as follows:
Initial Depreciation per Year = (Cost - Salvage Value) / Useful Life = ($510,000 - $10,000) / 10 = $50,000
Accumulated Depreciation after 7 Years = Depreciation per Year * Number of Years = $50,000 * 7 = $350,000
With the new estimation, the depreciation calculation will change:
New Depreciation per Year = (Cost - New Salvage Value) / New Useful Life = ($510,000 - $5,000) / 15 = $33,667
Adjusted Accumulated Depreciation after 7 years = New Depreciation per Year * Number of Years = $33,667 * 7 = $235,669
Therefore, the adjustment needed in year 8 to correct the prior years' depreciation would be as follows:
Depreciation Expense Adjustment = Old Accumulated Depreciation - Adjusted Accumulated Depreciation = $350,000 - $235,669 = $114,331
The corresponding journal entry in year 8 to reduce the accumulated depreciation would be:
- Debit Accumulated Depreciation: $114,331
- Credit Depreciation Expense: $114,331
It's important to note that actual accounting practices may require different procedures, and consulting accounting standards or a professional accountant is advised when handling such adjustments.