Question

Prepare the general journal entries that should be made at December 31, 2018, to record these events. On January 1, 2014, Jackson Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $50,000 salvage value, $800,000 cost Equipment, 12-year estimated useful life, $10,000 salvage value, $100,000 cost The building has been depreciated under the double-declining-balance method through 2017. In 2018, the company decided to switch to the straight-line method of depreciation. Jackson also decided to change the total useful life of the equipment to 9 years, with a salvage value of $5,000 at the end of that time. The equipment is depreciated using the straight-line method. Prepare the journal entries necessary to record the depreciation expense on the building in 2018.

Answer 1

To record the depreciation expense of the building in 2018, a general journal entry needs to be prepared. The depreciation expense can be calculated using the straight-line method. The entry would involve debiting Depreciation Expense - Building and crediting Accumulated Depreciation - Building.

Step-by-step explanation:

To record the depreciation expense on the building in 2018, we need to prepare the general journal entry. Since the company decided to switch from the double-declining-balance method to the straight-line method in 2018, we need to calculate the depreciation expense for the remaining useful life of the building. The formula for straight-line depreciation is (Cost - Salvage Value) / Useful Life.

In this case, the remaining useful life is 40 years - 2018 = 22 years. So, the depreciation expense for 2018 would be ($800,000 - $50,000) / 22 years = $34,091.

The general journal entry to record the depreciation expense on the building in 2018 would be:

Debit: Depreciation Expense - Building $34,091

Credit: Accumulated Depreciation - Building $34,091