Exercise 20-10 Change in depreciation methods [LO20-3] For financial reporting,
ID: 2335113 • Letter: E
Question
Exercise 20-10 Change in depreciation methods [LO20-3] For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2015 for $2,688,000. Its useful life was estimated to be six years with a $192,000 residual value. At the beginning of 2018, Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows ( in 000s) Year Straight- 2015 2016 2017 Declinin Balance $ 896 597 398 $1,891 Difference Line $480 181 $ 416 416 416 $1,248 (18) $643 Required: 2. Prepare any 2018 journal entry related to the change. (Enter your answers in dollars rounded to the nearest thousand. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the adjusting entry for depreciation in 2018. Note: Enter debits before credits. Event General Journal DebitCredit Record entry View general journal Clear entryExplanation / Answer
Accumulated depreciation
Cumulative effect of change in accounting principle
(being depreciation adjusted to accumulated depreciation account)
$643
$643
Note : when you change the depreciation method you can adjust the difference amount to the accumulated depreciation account.if you change from declining balance method to straight line method it increases the net income and retain earnings ,the reason is the depreciation under straight line method is lower when compared to declining balance method of depreciation.
Date General Journal debit Credit 2018Accumulated depreciation
Cumulative effect of change in accounting principle
(being depreciation adjusted to accumulated depreciation account)
$643
$643
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