For financial reporting, Clinton Poultry Farms has used the declining-balance me
ID: 2489731 • Letter: F
Question
For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2010 for $2,560,000. Its useful life was estimated to be six years with a $160,000 residual value. At the beginning of 2013, Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows ($ in 000s):
Prepare any 2013 journal entry related to the change.
For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2010 for $2,560,000. Its useful life was estimated to be six years with a $160,000 residual value. At the beginning of 2013, Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows ($ in 000s):
Explanation / Answer
There shall be made a journal entry to adjust the change in the depreciation method.
The adjustment amount shall be equal to the difference of accumulated depreciation as per both methods that is $ 601
Journal entry:
Date
Accounts title and explanation
Debit
Credit
Jan. 1, 2013
Accumulated depreciation - Equipment
$ 601.00
Retained earnings
$ 601.00
(Being adjustment made for change in method of depreciation)
There shall be made a journal entry to adjust the change in the depreciation method.
The adjustment amount shall be equal to the difference of accumulated depreciation as per both methods that is $ 601
Journal entry:
Date
Accounts title and explanation
Debit
Credit
Jan. 1, 2013
Accumulated depreciation - Equipment
$ 601.00
Retained earnings
$ 601.00
(Being adjustment made for change in method of depreciation)
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