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Ohttps://edugen.wileyplus.com/edugen/student/mainfr.uni .Q Search in c Assignment Gradebook ORION Downloadable eTextbook ment L SCREEN PRINTER VERSION BACK Additional Problem 7 On January 1, 2016, Waterway Corporation purchased a building to use as its factory, and some equipment to manufacture its product. The following information was determined at the time of purchase: Cost Useful Life Residual Value Depreciation Building$2,250,000 20 years Equipment $950,000 25 years 450,000 Double Dedining $95,000 Straight Line On January 1, 2019, Waterway decded to change the depreciation method for the building to the straight-line method, as a result of a change in the pattern of benefts received. There was no change to the total useful life or the residual value of the building Waterway also decided that the equipment would have a total useful life of only 13 years, with a residual value of only $46,000. The depreciation method for the equipment did not change. Prepare the journal entries to record depreciation for both assets for 2019. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 5,275.) Debit Credit Account Titles and Explanation Building: Equipment: SHOW LIST OF ACCOUNTS All Rights Reserved. A Division of Version 4.2 di ENG 1248 AM

Explanation / Answer

Since depreciation is an estimate the changes in estimate should be given a prospective effect.

Buliding:

Revised depreciation = Depreciable value / Remaining number of years of useful life

Revised depreciation = (2250000 - 450000) / (20 - 3) = $105882

So the entry in 2019 is as follows:

Depreciation A/c Dr $105882

To Building A/c $105882

Equipment:

Revised depreciation = Revised Depreciable value / Remaining number of years of useful life

Revised depreciation = (950000 - 46000) / (13 - 3) = $90400.

So the entry in 2019 is as follows:

Depreciation A/c Dr $90400

To Equipment A/c $90400

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