Question

Wardell Company purchased a minicomputer on January 1, 2022, at a cost of $47,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $5,000. 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 $3,800. Exercise 11-23 (Algo) 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 record the 2024 depreciation for the minicomputer using the double-declining-balance method, first calculate the book value at the start of 2024 ($30,200), apply the 20% double-declining rate, and then make a journal entry debiting Depreciation Expense and crediting Accumulated Depreciation for $6,040.

Step-by-step explanation:

Wardell Company purchased a minicomputer for $47,000, to be depreciated over 5 years with a $5,000 residual value. Later, the life span was adjusted to 10 years and residual value to $3,800. On January 1, 2024, they switched from straight-line to the double-declining-balance method of depreciation. To calculate the depreciation expense for 2024, first, ascertain the book value at the beginning of 2024, then apply the double-declining rate.

• Initial annual depreciation (straight-line) for 2022 and 2023: (Cost - Residual value) / Useful life = ($47,000 - $5,000) / 5 = $8,400 per year.
• Depreciated amount by the end of 2023: $8,400 x 2 years = $16,800.
• Book value on January 1, 2024: $47,000 - $16,800 = $30,200.
• The new double-declining rate: (100% / 10 years) x 2 = 20% per year.
• Depreciation for the year 2024: 20% of $30,200 = $6,040.

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

• Debit Depreciation Expense: $6,040.
• Credit Accumulated Depreciation - Minicomputer: $6,040.