Irwin, Inc., constructed a machine at a total cost of $46 million. Construction
ID: 2537377 • Letter: I
Question
Irwin, Inc., constructed a machine at a total cost of $46 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At the beginning of 2018, Irwin decided to change to the straight-line method.
Ignoring income taxes, prepare the journal entry relating to the machine for 2018. (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 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Explanation / Answer
Accumulated Depreciation balance at the beginning of 2018 = ($46 - $2) x (10+9+8) / 55 = $21.60 millions
Book value at the beginning of 2018 = $46.00 - $21.60 = $24.40 millions
Depreciation for 2018 to the straight-line method = ($24.40 - 2) / 7 years = $3.20 millions
Date Accounts Titles and Explanation Debit Credit 2018 Depreciation expense $3.2 millions Accumulated depreciation $3.2 millionsRelated Questions
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