Ayayai Co. purchased equipment for $535,600 which was estimated to have a useful

Question

Ayayai Co. purchased equipment for $535,600 which was estimated to have a useful life of 10 years with a salvage value of $10,800 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2018, it is determined that the total estimated life should be 15 years with a salvage value of $4,400 at the end of that time. (a) (b) Prepare the entry (if any) to correct the prior years' depreciation. Prepare the entry to record depreciation for 2018 (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts No. Account Titles and Explanation Debit Credit

Explanation / Answer

Journal Entry Date Particulars Dr. Amt. Cr. Amt. a. No Entry b. Depreciation Expense      20,480.00    Accumulated Depreciation - Equipment    20,480.00 (To record the depreciation expense for 2018) Equipment cost    535,600.00 Accumulated Dep. To Date - ($535,600 - $10,800)/10 X 7 Years    367,360.00 Book Value as on Jan 1, 2018    168,240.00 Estimated Residual Value        4,400.00 To be Depreciated over Remaining 8 Years Life    163,840.00 Annual Depreciation - $163,840 / 8 Years      20,480.00

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