During 2011 and 2012, Faulkner Manufacturing used the sum-of-the-years%u2019-dig

Question

During 2011 and 2012, Faulkner Manufacturing used the sum-of-the-years%u2019-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2013, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years.

     For an asset that cost $21,000 with an estimated residual value of $1,000 and an estimated useful life of 10 years, the depreciation under different methods is as follows:

Prepare the journal entry that Faulkner will record in 2013 related to the change. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

2.Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years%u2019- digits in 2013. Prepare the journal entry that Faulkner will record in 2013 related to the change.(If no entry is required for a particular event, select "No journal entry required" in the first account field.)

During 2011 and 2012, Faulkner Manufacturing used the sum-of-the-years%u2019-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2013, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years.

     For an asset that cost $21,000 with an estimated residual value of $1,000 and an estimated useful life of 10 years, the depreciation under different methods is as follows:

Explanation / Answer

PARTICULARS DEBIT CREDIT Depreciation Adj A/C 2909     To Acc. Depreciation A/C 2909 Tax Payable A/C 1163.6 Retained Earnings A/C 1745.4     To Depreciation Adj A/C 2909 PARTICULARS DEBIT CREDIT Acc. Depreciation A/C 2909     To Depreciation Adj A/C 2909 Depreciation Adj A/C 2909     To Tax Payable A/C 1163.6     To Retained Earnings A/C 1745.4

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