For financial reporting, Clinton Poultry Farms has used the declining-balance me
ID: 2524294 • Letter: F
Question
For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for con- veyor equipment acquired at the beginning of 2015 for $2.560,000. Its useful life was estimated to be six years with a $160,000 residual value. At the beginning of 2018. Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows: ($ in thousands) Declining Balance Year 2015 2016 2017 Straight-Line Difference 400 400 400 $853 569 379 $1,801 $453 169 (21) $1,200 $601 Required: l. Briefly describe the way Clinton should report this accounting change in the 2017-2018 comparative finan- cial statements Prepare any 2018 journal entry related to the change. 2.Explanation / Answer
1)since the change in depreciation method is a change in accounting policy that whose effect should be considered retrospectively and adjusted in current year financial statement as prior period adjustment .
The After tax increase or decrease in depreciation should be taken effect from retained earning
2)
Date Account Debit credit 2018 Accumulated depreciation -equipment 601 Retained earning 601 [being excess depreciation charged credited to retained earning ]Related Questions
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