Exercise 22-8 Splish Cole Inc. acquired the following assets in January of 2015
ID: 2527732 • Letter: E
Question
Exercise 22-8 Splish Cole Inc. acquired the following assets in January of 2015 $517,500 Equipment, estimated service life, 5 years; salvage value, $13,500 Building, estimated service life, 30 years; no salvage value The equipment has been depreciated using the sum-of-the-years'-digits method for the first 3 years for financial reporting purposes. In 2018, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method (a) Prepare the general journal entry to record depreciation expense for the equipment in 2018 (b) Prepare the journal entry to record depreciation expense for the building in 2018. Round answers to 0 decimal places, e.g. 125. 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 LINK TO TEXTExplanation / Answer
No. Account Titles and Explanation Debit Credit (a) Depreciation Expesne - Equipment 50400 Accumulated Depreciation -Equipment 50,400 (b) Depreciation Expesne - Building 18,243 Accumulated Depreciation -Building 18,243 Explanation a Equipment Depreciaton Expense for the year 2018 Year Depreciation Base Remaining life of machine Depreciation Fraction Depreciation Expense Book Value 2015 504000 5 5/15 168000 349500 2016 504000 4 4/15 134400 215100 2017 504000 3 3/15 100800 114300 Note: Depreciation Expense = Remaining useful life of the asset/ Sum of the years digits Xdepreciable Cost Depreciation Base = 517,500-13,500 = 504,000 Sum of the years digits = 1+2+3+4+5 =15 Book value at end of the Year 2015 :517,500-168,000 =349,500 Book value at end of the Year 2017 : 114,300 Remaining life of asset =2 years Salvage value: 13,500 Depreciation Expense for year 2018 using Straight line method =(114,300 -13,500)/2 = 50,400 Explanation b Annual Depreciation of Building for 2015,2016,2017 under straight line method = Building Cost-Salvage value)/Life of asset =(750,000-0)/30 = 25,000 Accumuated depreciation for 3 year = 25,000X3 =$75,000 Net Book value of Building = 750,000-75,000 =675,000 Depreciation Expense for building in 2018 =(675,000-0)/37 =18,243
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