Question

For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2018 for $2,720,000. Its useful life was estimated to be six years with a $200,000 residual value. At the beginning of 2021, Clinton decides to change to the straight-line method.

The effect of this change on depreciation for each year is as follows:

Year Straight-Line Declining Balance Difference
2018 $400 $853 $453
2019 400 569 169
2020 400 379 (21)
$1,200 $1,801 $601

Required:
Prepare any 2021 journal entry related to the change. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

Answer 1

Answer: Please see below for answers

Step-by-step explanation:

Year Straight-Line Declining Balance Difference (000s)

2018 $400 $853 $453

2019 400 569 169

2020 400 379 (21)

$1,200 $1,801 $601

Asset cost =$2,720,000

Accumulated depreciation till 2020= $1,801,000

Book value beginning of 2021=$919,000

Residual value= -$200,000

Depreciable value= $719,000

Remaining estimated life= 6-3years=3

Annual straight line depreciation= $719,000 /3 = $239,667

rounded dollar= $240,000

2021 journal entry

Adjusting entry Debit Credit

Depreciation expense $240,000

Accumulated depreciation $240,000