During 2011 and 2012, Faulkner Manufacturing used the sum-of-the-years-digits (S

Question

During 2011 and 2012, Faulkner Manufacturing used the sum-of-the-years-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.)

Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years- 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-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

Asset cost $21,000

Accum dep (SYD) to date (given) (6,909)

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Undepreciated cost, Jan. 1, 2006 $14,091

Estimated residual value (1,000)

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To be depreciated over remaining 8 years $13,091

8years

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Annual straight-line depreciation 2006-13 $1,636

Adjusting entry (2006 depreciation):

Depreciation expense (calculated above) Dr1636

Accumulated depreciation Cr 1636

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