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 $3,250,000. Its useful life was estimated to be five years, with a $255,000 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 2010 $ 400 $ 853 $ 453 2011 400 569 169 2012 400 379 (21) $ 1,200 $ 1,801 $ 601 Required:Prepare any 2013 journal entry related to the change.

Answer 1

Answer and Explanation:

The journal entry is shown below:

Depreciation expense Dr $398,000

To Accumulated depreciation $398,000

(Being the depreciation expense is recorded)

For recording this we debited the depreciation expense as it increased the expenses and credited the accumulated depreciation as it decreased the value of the assets

The computation of the depreciation expense is as follows

Cost of the asset $3,250,000

Less: accumulated

depreciation till date ($1,801,000)

Undepreciation cost $1,449,000

Less:

Estimated residual value ($255,000)

Value for remaining

3 years $1,194,000

Divided by 3 years ÷ 3

Depreciation expense $398,000