Machinery purchased for $ 141,000 by Tom Brady Co. in 2010 was originally estima

Question

Machinery purchased for $ 141,000 by Tom Brady Co. in 2010 was originally estimated to have a life of 8 years with a salvage value of $ 9,400 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2015, it is determined that the total estimated life should be 10 years with a salvage value of $ 10,575 at the end of that time. Assume straight-line depreciation.

1. Prepare the entry to correct the prior year's depreciation, if necessary

2. Prepare the entry to record depreciation for 2015

Explanation / Answer

(1) No adjusting entry is required

(2) Depreciation charged till 2015 = [(141000-9400)/8]*5 = 82250

Book Value value = 141000 - 82250 = 58750

Remaining useful life = 5

Depreciation = (58750-10575)/5 = 9635

Entry in 2015

Depreciation Expense..........Dr 9635

To, Accumulated Depreciation 9635

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