Machinery purchased for $66,600 by Sheridan Co. in 2013 was originally estimated

Question

Machinery purchased for $66,600 by Sheridan Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of $4,440 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2018, it is determined that the total estimated life should be 10 years with a salvage value of $4,995 at the end of that time. Assume straight-line depreciation.

a) Prepare the entry to correct the prior year's depreciation, if necessary. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

b) Prepare the entry to record depreciation for 2018. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Use Machinery related account.)

Explanation / Answer

a No entry 0 No entry 0 b Depreciation for first 5 years = (66600-4440)/8*5= $38850 Book value of machinery in 2018 = 66600-38850= $27750 Depreciation expense 4551 =(27750-4995)/5          Accumulated depreciation-Machinery 4551

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