Question

Required information [The following information applies to the questions displayed below.] Wardell Company purchased a minicomputer on January 1,2022 , at a cost of $58,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $16,000. 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 $2,200. 2. Prepare the year-end journal entry for depreciation on December 31, 2024. Assume that the company uses the double-decliningvalance method instead of the straight-line method.

Answer 1

To prepare the year-end journal entry for depreciation on December 31, 2024, using the double-declining balance method, you need to calculate the depreciation expense and record it in the appropriate accounts.

Step-by-step explanation:

The year-end journal entry for depreciation on December 31, 2024, using the double-declining balance method can be calculated as follows:

1. Calculate the depreciation expense for the year using the double-declining balance method. The formula is: (Book Value - Residual Value) * Double Declining Rate. In this case, the book value is $58,000 - accumulated depreciation, the residual value is $2,200, and the double declining rate is 2 / Estimated useful life in years. So, the depreciation expense for the year is ($58,000 - accumulated depreciation - $2,200) * (2 / 10).
2. Record the depreciation expense by debiting the Depreciation Expense account and crediting the Accumulated Depreciation account.

Make sure to update the accumulated depreciation for the year by adding the depreciation expense to the previous balance.

Answer 2

To calculate the year-end journal entry for depreciation using the double-declining balance method for a computer with a revised total useful life of 10 years and a new salvage value, begin by finding the book value at the beginning of the year and then apply the double-declining balance rate to it. The depreciation expense for 2024 is calculated as 25% of the book value, which is $10,300.

Step-by-step explanation:

To calculate the year-end journal entry for depreciation on December 31, 2024, assuming the use of the double-declining balance method instead of the straight-line method, we first need to determine the book value of the computer at the beginning of 2024. The original cost of the minicomputer was $58,000 and it was initially depreciated over 5 years with a salvage value of $16,000. For two years (2022 and 2023), the annual depreciation using the straight-line method would have been (original cost - salvage value) / life in years, which equals ($58,000 - $16,000) / 5 = $8,400 per year. So, by the start of 2024, accumulated depreciation is $8,400 ×2 = $16,800.

The book value at the beginning of 2024 before the adjustment is $58,000 - $16,800 = $41,200. With the revision in estimated total useful life to 10 years and residual value to $2,200, the book value minus revised salvage value at the start of 2024 will be spread over the remaining revised life of the computer, which is now 10 - 2 = 8 years. Thus, for 2024, the straight-line depreciation expense would be ($41,200 - $2,200) / 8 = $4,875.

However, since we need to use the double-declining balance method, we double the straight-line depreciation rate. The straight-line rate for the remainder of the useful life would be 1 / 8 = 12.5%, thus the double-declining balance rate is 25%. The depreciation expense for 2024 using this method is 25% of the book value at the beginning of 2024, which is 25%× $41,200 = $10,300.

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

Debit: Depreciation Expense $10,300
Credit: Accumulated Depreciation $10,300