Bay Company purchased a piece of machinery for $30,000 on January 1, 2011, and h

Question

Bay Company purchased a piece of machinery for $30,000 on January 1, 2011, and has been depreciating the machine using the sum-of-the-years'-digits method based on a five-year estimated useful life and no salvage value. The balance of the accumulated depreciation account for this asset was $18,000 as of December 31, 2012. On January 1, 2013, Bay decided to switch to the straight-line method of depreciation. The salvage value is still zero and the estimated useful life is changed to a total of six years from the date of purchase. Ignore income taxes. (3 points total) Required: (1.) Prepare the appropriate journal entry, if any, to record the accounting change. You must show how you calculated the number for credit.

Explanation / Answer

Accumulted depreciation as per the sum-of-the-years'-digits method=$18,000

Accumulated depreciation as per SLM and Estimated useful life is 6 years=$30,000/6*1=$5,000

now the company is decided to change depreciation method from the sum-of-the-years'-digits method to straight-line method of depreciation

so the the depreciation to be reversed=$18,000-$5,000=$13,000

Date Account title Debit Credit January 1, 2013 Accumulated depreciation $13,000 Depreciation $13,000

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