1. Prepare the appropriate journal entry, if any, to record the accounting chang

Question

1. Prepare the appropriate journal entry, if any, to record the accounting change.
2. Prepare the journal entry to record the depreciation expense for 2011.

The Tildy Company bought a bulldozer for $120,000 on Jan 1, 2009. They have been recording depreciation based upon the sum-of-the-years-digits according to a five year useful life and no salvage value for the bulldozer. On January 1, 2011, Tildy switched to the straight line method of depreciation. The estimate life is the same and so is the salvage value.

Explanation / Answer

Sum of the year's digits = n (n+1) /2 = 5 (5 -1) / 2 = 15

Depreciation for the year 2009 = 120000 * 5 /15 = $40000

Depreciation for the year 2010 = 120000 * 4 /15 = $32000

On jan 1, 2011, switched to the Straight line method of depreciation with useful life of 5 years.

Depreciation for the years 2009 & 10 = 120000 * 2 / 5 = $48000

1. Journal Entry to record the accounting change :

Debit Accumulated Depreciation on Equipment $72000 (total of 40000 + 32000)

Credit Accumulated Depreciation on Equipment (revised) $48000

Credit Gain on Depreciation method change $24000

2. Journal entry to record the depreciation expense for 2011:

Debit Depreciation on bulldozer $24000

Credit Accumulated Depreciation on Equipment (Revised) $24000

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