Question

Change in estimate; useful life and residual value of equipment [LO11-2, 11-5] [The following information applies to the questions displayed below.] Wardell Company purchased a minicomputer on January 1, 2022, at a cost of $40,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000. On January 1. 2024, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $900. Exercise 11-23 (Static) Part 2 2. Prepare the year-end journal entry for depreciation on December 31, 2024. Assume that the company uses the double-decliningbalance method instead of the straight-line method. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to nearest whole dollar.

Answer 1

To prepare the year-end journal entry for depreciation on December 31, 2024, use the double-declining balance method. Calculate the depreciation expense using the formula and information provided, and then record the entry.

Step-by-step explanation:

To prepare the year-end journal entry for depreciation on December 31, 2024, we need to calculate the depreciation expense using the double-declining balance method. The formula for this method is:

Depreciation Expense = (Book Value - Residual Value) / Useful Life

Using the information provided, the book value of the equipment on January 1, 2024, would be $36,000 ($40,000 cost - $4,000 previous accumulated depreciation) and the revised useful life is 10 years with a revised residual value of $900.

Therefore, the depreciation expense for 2024 would be:

Depreciation Expense = ($36,000 - $900) / 10 = $3,510

The year-end journal entry for depreciation on December 31, 2024, would be:

Depreciation Expense $3,510

Accumulated Depreciation $3,510