Machinery purchased for $68,400 by Metlock Co. in 2013 was originally estimated

Question

Machinery purchased for $68,400 by Metlock Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of $4,560 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2018, it is determined that the total estimated life should be 10 years with a salvage value of $5,130 at the end of that time. Assume straight-line depreciation.

Prepare the entry to correct the prior year's depreciation, if necessary. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the entry to record depreciation for 2018. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Use Machinery related account.)

Explanation / Answer

Computation of Depreciation Journal Entry for 2018 Particular Amount Account Tittle & Explanation Debit Credit Original Cost $68,400 Depreciation Expenses $4,788 Less: Salvage value $4,560 Accumulated Depreciation $4,788 Depreciable value $63,840 (To record depreciation for the year 2008) Life 8 year Depreciation per year($63840 ÷ 8) $7,980 Depreciation for first five years ($7980 x 5) $39,900 Book Value in the beginning of 2018 ($68,400 - $39900) $28,500 After reconsideration it is determined that Remaining life 5 Year Revised Depreciable Value ($28500– $4560) $23,940 Depreciation per year ($23940/5) $4,788

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