Irwin, Inc., constructed a machine at a total cost of $32 million. Construction
ID: 2515931 • Letter: I
Question
Irwin, Inc., constructed a machine at a total cost of $32 million. Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $2 million. At the beginning of 2016, Irwin decided to change to the sum-of-the-years’-digits method.
Ignoring income taxes, prepare the journal entry relating to the machine for 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)
Irwin, Inc., constructed a machine at a total cost of $32 million. Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $2 million. At the beginning of 2016, Irwin decided to change to the sum-of-the-years’-digits method.
Explanation / Answer
Calculate depreciation expense for 2016 :
Depreciable expense = (32-2/10) = 3 million per year
Accumlated depreciation for 2013 to 2015 = 3*3 = 9 million
Sum of year digit = 7+6+5+4+3+2+1 = 28
2016 dep = (32-9-2)*7/28 = 5.25
Date accounts & explanation debit credit Depreciation expense 5.25 Accumlated depreciation 5.25 (To record depreciation expense)Related Questions
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